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CHAPTER 11: TRIAL BALANCE

A Trial Balance is simply a list of all the accounts (both debit & credit balances) that a business has.

The primary purpose for a Trial Balance is to determine the mathematical equality between all the accounts with debit balances & accounts with credit balances.

The process of drawing up the Trial Balance enables the accountant to determine whether errors had taken place during the accounting process.

Some errors revealed by the totals of the Trial Balance NOT being equal:

Calculation mistakes (e.g. you did not add the debit & credit columns correctly);

Single entry omission errors (e.g. you omitted to list either a debit or credit entry when listing the balances)

Posting errors (e.g. posting a journal entry to the wrong side of the ledger account)

There are other errors, which are not revealed by the totals of the Trial Balance (i.e. the totals of the Trial Balance are still EQUAL):

Omission of an entire transaction from the books of the business

Commission errors (e.g. cash repayment of a loan to Chris Bank is posted to the correct side of the Ledger Account of Fraser Bank)

Errors of principle (e.g. wrong recording of car repairs to the Motor Vehicles Account instead of the Motor Expenses Account)

Complete reversal of entries

Compensating errors (e.g. calculation error of S%50 in a debtor's account is compensated by calculation errors of S$25 each in two creditors' accounts)

Errors of original entry (e.g. the rules of double-entry are observed correctly but the wrong figures are used)