Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes: Trial Balance and Errors
- As already stated there are two main reasons for preparing a Trial Balance:
- It is used as a starting point for preparing financial statements
- To check for errors in the accounting system
- Given that the second purpose of a Trial Balance is to check for errors in accounting records
- It would be natural to assume that when a Trial Balance balances it means that there are no errors in the accounting records
- The truth though is that there are some errors that a Trial Balance will not reveal
- A Trial Balance will reveal the following errors:
- Addition and arithmetic errors within the records
- A single entry in the books instead of double entry
- Using different figures for the credit and debit entries
- These errors are only revealed if there are no compensating errors for example single debit entry of $500 is made in the books while at the same time the Creditors Ledger is overstated by $500
- These two errors would cancel out each other and might remain hidden
- If you want to know more about errors that are not revealed by a Trial Balance click here
To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.