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Trial balance is prepared purposely to show the arithmetical accuracy of the entries in the ledger. The accountant or bookkeeper can proceed to the next step of the accounting process only if the trial balance is equal. But if a problem is discovered with the trial balance, finding the error is necessary in order to move forward in the process.  A trial balance will not balance if both the debit side and the credit side are not equal, and the reason has to be explored and corrected.

Errors Not Disclosed by the Trial Balance

1. Errors of Omission: This error occurs when an item is completely omitted from the debit or credit sides of the account.

2. Error of Commission: This error occurs when a transaction is entered in wrong person’s account. e.g. entered into Bada account instead of Dada account.

3. Error of Principle: This error occurs when transactions are entered into a wrong class of account. e.g. entered into Motor Van account instead of Motor expenses account.

4. Error of Original Entry: This error occurs when a wrong amount is entered on the debit and credit sides of the account e.g Sales of N95 to Ayo account entered in the account as N59.

5. Compensation Error: This error occurs when the same amount is posted to the two sides of the ledger account. This error cancels each other out.

6. Error of Complete Reversal of Entry: This occurs when the double entry for a transaction is reversed. The account to be debited has been credited and vice-versa.

Reasons why Trial Balance May Not Balance

(i) Error of posting

(ii) Wrong figures in the ledger

(iii) Wrong entries in the ledger

(iv) Errors in additions i.e Overcast or Undercast.

(v) Unextracted balances from the ledger.

Evaluation Questions

1. Explain Trial Balance

2. Explain three (3) Importance of Trial balance

3. Explain the Errors that are not disclosed by trial balance agreement.

4. State the Rules of preparing Trial balance

5. State three (3) Differences between Trial balance and Balance sheet.


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