Trial Balance

Question 1

Trial Balance

Answer 1

List of all balances in the ‘active’ ledger accounts divided into debit and credit columns prepared at a particular date.

Question 2

Reasons for preparing a trial balance

Answer 2

• Checking the arithmetic accuracy of the ledger
• Ensure that double entry has taken place
• Detect errors made in the ledger (or journals)
• Allow the owner/manager to inspect and evaluate the ledger account balances on any one day
• Allow for the preparation of financial reports to take place

Question 3

Errors FOUND by preparing a trial balance

Answer 3

• Failing to record part of a transaction in the ledger
• Making two DEBIT entries or two CREDIT entries (not equal debits and credits)
• Making a transposition error (374 instead of 346)
• Incorrectly calculating a ledger account balance
• Leaving a ledger account balance out of the trial balance
• Listing a ledger account balance on the wrong side of the trial balance
• Incorrectly totalling journals (if using specialised journals)

Question 4

Errors NOT FOUND by preparing a Trial Balance

Answer 4

• Error of omission (transaction left out of books completely)
• Error of commission (recording an entry in the wrong ledger account but on the correct side)
• Compensating errors (making two separate erros that are of equal amounts and that cancel each other out OR two errors in the trial balance which cancel each other out
• Making an entry on the wrong side of each ledger account (DR wrong account and CR wrong account)
• Error of original entry (recording an incorrect amount in the journals)