Professional Documents
Culture Documents
Trial Balance
To
Final Accounts
• Describe how to prepare a trial balance
• Discuss the rectification of errors in trial balance
• Describe different types of final accounts
Trial Balance
• If trial balance does not agree, we need to locate the errors committed
which may occur at the time of recording, classifying, or summarising a
financial transaction.
• Even when the trial balance is correct, some errors may remain in the
accounting records.
• Two types of errors are committed:
a) errors that affect the trial balance and
b) the errors that do not affect the trial balance
Rectifying Errors
Errors of Principle
Errors of Omission
Error of Commission
Errors of
Compensation
Errors of Principle
Example
Occurs- In case, there is lack of • The revenue Expenditure may be
understanding, classification . taken as capital or vice versa.
• Recording of personal expenses
of director as business expenses.
Errors of Omission
Example
Compensating errors happens while When purchase entry of $10000 is
preparing trial balance, it happens recorded on credit side and sales
when an error on debit side is entry of $10000 is recorded on debit
compensated by an error on credit side.
side and therefore it does not have
any effect on the agreement of trial
balance
Financial Statements
• Revenue
• COGS
• Gross profit
• Operating expenses
• Administrative expense
• Operating income-EBIT
• Profit before tax
• Net profit
Balance
Sheet
Equity and
Assets
liabilities
• Operating Activities
• Investing Activities
• Financing Activities
Chapter 3- Trial Balance to Final Accounts
When one type of error is set off by the another type of error, its called as
………………..
• Error of Omission
• Error of Commission
• Error of Principle
• Errors of Compensation