Errors Not Disclosed by Trial Balance
Agreement of the trial balance is not a conclusive proof of the accuracy of the accounts. There may be certain errors which might have been crept into the accounts but do not affect the agreement of the trial balance.
1. Errors of Complete Omission: If a transaction is completely omitted from being recorded in the books of accounts, such an omission will not affect the agreement of the trial balance.
2. Errors of Commission: These types of errors happen due to the negligence and cannot be located by preparing trial balance. Suppose a sales of INR 10,000 was recorded in books as INR 100. The balances both the accounts i.e sales accountant and cash account will be affected only by INR 100 and hence the trial balance will not be affected.
3. Compensating Errors: Suppose, an accountant posted INR 500 less in the debit side of purchase account and at the same time he also posted INR 500 less in credit side of sales account. In this case, an error has been compensated by another error. Such errors are called compensating error and will not affect the trial balance.
4. Errors of principles: When an accounting principle has been violated while recording a transaction in the books of accounts, such errors are called errors of principle. For example, the purchase of an asset if recorded in the purchases account will be an error of principle but since the purchase account will be debited and the suppliers accounts will be credited with the same amount this error will not affect the trial balance.
Errors Disclosed by Trial Balance
If the Trial Balance does not tally, it will indicate that certain errors have been committed which have affected the agreement of the Trial Balance.
1. Wrong Casting: If the total of the Cash Book or some other Subsidiary Book is casted wrong, the Trial Balance will not tally.
2. Posting to the Wrong Side of an Account: If instead of posting an amount on the debit side of an account, it is posted on the credit side, or vice versa, the Trial balance will not tally.
3. Posting of Wrong Amount: The Trial Balance will not tally if the posting in an account is made with an incorrect amount.
4. Omission of Posting of One aspect of a Transaction: For example, if INR 500 has been received from Mr.A and correctly entered in the Cash Book but if it is omitted to be posted on the credit side of Mr.A's Account, the Trial Balance will not tally.
5. Posting an amount twice in an Account: For example, if any transaction is posted twice, the Trial Balance will not tally.
6. Errors of Totaling and Balancing of Accounts in the Ledger: Errors may occur in the totaling of debit or credit sides of accounts in the Ledger or in the balancing of accounts in the Ledger. Because the balances of accounts are transferred to the Trial Balance, resulting in transferring wrong balances in the Trial Balance. This will result into the disagreement of the trial balance.