. 3-2. | Basic Financial Accounting and Reporting 2022 Edition by Prof. WIN Ballada ————— Weather or not! The moral of the following story is to look for a potentially prosperous technology gathering dust and exploit it in a good way. That's what Frederic Fox, 34, did when he bought a business that supplied advisory services to large corporations. After renaming the acquired company as Strategic Weather Services (SWS) Inc., Fox expanded his core business—patented technology that forecasts weather 12 months in advance in North America and Europe, and analyzes business techniques to predict a company’s success. Today, his 90-employee firm projects 1999 sales of US$13.0 million from its three divisions. One division helps retailers and manufacturers plan sales based on long-range weather data. Another division helps utility companies plan operations, launched late last year, the third division offers consumers the popular WeatherPlanner, the long-range weather forecasting via a web site. Fox did not know if the WeatherPlanner concept would prosper. He seriously considered starting the business only after consulting SWS meteorologists in 1993 to plan his wedding. His fiancée’s requirement was for Fox to ensure that their wedding would be free from rain. It was rain-free. In 1994, WeatherPlanner hit the drawing board. Adapted from: Business Start-Ups, April 1999. Fox provides people with valuable information—weather forecasts twelve months in advance in North America and Europe. His weather services help businesses plan their Operations. Fox is using data to study the weather cycle in that part of the world. In parallelism, entities also have their own “weather” cycle—the accounting cycle. . TRANSACTION ANALYSIS (Step 1) The'analysis of transactions should follow these four basic steps? . ‘Identify the transaction’from source documents, , . (Indicate the accounts—either assets, liabilities, equity, income or expenses— ‘affected by the transaction. , Ascertain whether each account is increased or decreased)by the transaction. 4. Using the rules of debit and credit, determine whether to debit or credit the account to record its increase or decrease. : ne SOURCE DOCUMENTS S are the starting points in the accounting cycle? By relying on source documents, transactions and events can be analyzed as to how they will affect performance and financial position. { Source’ documents} identify and describe transactions and events entering the accounting process, These original written evidences contain information about the nature and the amounts of the transactions. “These are the bases for the journal entries; some of the more common source documents are sales invoices, cash register tapes, official receipts, bank deposit slips,Recording Business Transactions | 3-3 bank statements, checks, purchase orders, timecards and statements of account. ‘Specimens and discussions on some of these documents will be in Chapter 7. ACCOUNTING CYCLE Thefaccouinting cyeld refers to a series of Sequential steps or procedures performed to accomplish the accounting process.:The steps in the cycle and their aims follow: Step 1 Identification of Events to be Recorded : Aim: To gather information about transactions or events During the generally through the source documents. accounting Step2 Transactions are Recorded in the Journal period Aim: To record the economic impact of transactions on the firm in a journal, which is a form that facilitates transfer to the accounts. Step 3 Journal Entries are Posted to the Ledger Aim: To transfer the information from the journal to the ledger for classification. Step 4 Preparation of a Trial Balance Aim: To provide a listing to verify the equality of debits and credits in the ledger. Step5 — Preparation of the Worksheet including Adjusting Entries Aim: To aid in the preparation of financial statements. Step6 Preparation of the Financial Statements Aim: To provide useful information to decision-makers. Atthe end ae 7 ofthe . Step7 Adjusting Journal Entries are Journalized and Posted accounting Aim: To record the accruals, expiration of deferrals, period estimations and other events from the worksheet. Step 8 — Closing Journal Entries are Journalized and Posted Aim: To close temporary accounts and transfer profit to owner's equity. Step9 Preparation of a Post-Closing Trial Balance Aim: To check the equality of debits and credits after the closing entries. Atthestart Step 10 Reversing Journal Entries are Journalized and Posted of the next Aim: To simplify the recording of certain regular transactions period in the next accounting period. This cycle is repeated each accounting period. The first three steps in the accounting cycle are accomplished duririg the period. The fourth to the ninth steps generally occur at the end of the period. The last step is optional and occurs at the beginning of the next period.WIN Ballada 3-4 | Basic Financial Accounting and Reporting 2022 Edition by Pr The discussion in this chapter will focus on the first four steps. The fifth and sixth steps in Chapters 4 and 5 while the rest will be taken up in Chapter 6. Refer to the following diagram for steps 2, 3 and 4. The General Journal Shows all the effects of a transaction . in terms of debits and credits. A Office Equipment xx Cash xx Accounts Payable xx Posting Transferring the amounts from the general journal to appropriate accounts in the «ash ledger. The Ledger Al Used to classify and summarize transactions and to prepare data for basic financial statements. Office quipment Accounts Payable Listing of all ledger accounts, in Trial Balance order, with their respective debit or credit balances. Assets Liabilities Owner's Equity Revenues ExpensesRecording Business Transactions | 3-5 THE JOURNAL ‘ t Th lis a Chronological record of the entity's transactions. A journal entry shows fall the effects of a busines transaction in terms of debits and credits. Each transaction al rather than directly in the ledger. A journal is called the book of original entry, he nature and volume of transactions of the business determine the number and type of journals needed. The (genér2 Format The standard contents of the general journal are as follows: 1. [D8tel The year and month are not rewritten for every entry unless the year or month changes or a new page is needed. 2. (AGCOURE Titles and Explanation) The ‘account to be debited is entered at the extreme left of the first line while the account to be credited is entered slightly indented on the next line. A brief description of the transaction is usually made on the line below the credit. Generally, skip a line after each entry. 3. [P:Ril(Posting reference). This will be used when the entries are posted, that is, until the amounts are transferred to the related ledger accounts. The posting process will be described later. 4, (Debit The debit amount for each account is entered in this column. 5. {iCFedit! The credit amount for each account is entered in this column. Assume that Dr. Rose Besario established her own wedding consultancy with an initial investment of P250,000 on May 1. The journal entry is shown below: Journal page 1 Date Account Titles and Explanation PR. Debit | Credit 2 2021 2 | May 1 | Cash 250,000 3 Besario, Capital 250,000 4 Initial investment. 5 ple and Compound Entry Ina) account credited. An example of thi Besario. However, some transactions require the use of more than two accounts. ‘one account is debited and the other is the entry to record the initial investment of3-6 | Basic Financial Accounting and Reporting 2022 Edition by Prof. WIN Ballada When three or more accounts are required in a journal entry, the entry Is referred to as a/compound entry. TRANSACTIONS ARE JOURNALIZED (Step 2) ‘ After the transaction or event has been identified and measured, it is recorded in the ijournal. The process of recording a:transaction is called journalizing. The following are the transactions for Weddings “R” Us during the month of May. The double-entry | system will be used. To understand the nature of the affected accounts, the letter A (for asset), L (liability) or OE (owner's equity) is inserted after each entry. In addition, owner’s equity is further classified into OE:! (income) and OE:E (expenses) bi Note that the,rules of do ble-entry system are ob in each transaction: 1 1. Two or more accounts are affected by each transaction. 2. The sum of the debits for every transaction equals the sum of the credits. 3. The equality of the accounting equation is always maintained. ‘ | Initial Investment (Source of Assets) ' ' May 1 Dr. Rose Besario is a social entrepreneur from the South. She is _ into a lot of interesting causes. Her fine taste is preeminent such that she is considered an authority in planning weddings. She does not intend to “charge much”. Upon the advice and prodding of an esteemed colleague, Dr. Yolanda Sayson, Besario decided to organize her wedding consultancy. She invested P250,000 into this entity. Analysis Assets increased. Owner's equity increased. Rules Increases in assets are recorded by debits. Increases in owner's equity are recorded by credits. Entry Increase in assets is recorded by a debit to cash. Increase in owner's equity is recorded by a credit to Besario, Capital. Dr. cr. Cash (A) 250,000 Besario, Capital (OE) 250,000Recording Business Transactions | 3-7 Rent Paid in Advance (Exchange of Assets) May 1 Analysis Rules Entry Rented office space and paid two months' rent in advance, P8,000. Assets increased. Assets decreased. Increases in assets are recorded by debits, Decreases in assets are recorded by credits. Increase in assets is recorded by a debit to prepaid rent. Decrease in assets is recorded by a credit to cash. Dr. Cr. Prepaid Rent (A) 8,000 Cash (A) 8,000 Note Issued for Cash (Source of Assets) May 2 Analysis Rules Entry Rose Besario issued a promissory note for a P210,000 loan from Metrobank. This availment will be used for the acquisition of a service vehicle. The note carries a 20% interest per annum. The arrangement with the bank is that both the interest and the principal are payable in full in one year. Assets increased. Liabilities increased. Increases in assets are recorded by debits. Increases in liabilities are recorded by credits. . Increase in assets is recorded by a debit to cash. Increase in liabilities is recorded by a credit to notes payable. Dr. cr. Cash (A) . 210,000 Notes Payable (L) 210,000 May 2 Hired an office assistant and an account executive each with a P7,800 monthly salary. Or, each is to receive P300 per day for the 26-day work month. No entry is necessary at this point. They started work immediately. \3-8 | Basic Financial Accounting and Reporting 2022 Edition by Prof. WIN Ballade ee Service Vehicle Acquired for Cash (Exchange of Assets) May 4 Acquired service vehicle for P420,000. Analysis Assets increased. Assets decreased. Rules Increases in assets are recorded by debits. Decreases by credits. Entry Increase in assets is recorded by a debit to service vehicle. Decrease in assets is recorded by a credit to cash. Or. Cr. Service Vehicle (A) 420,000 Cash (A) 420,000 Insurance Premiums Paid (Exchange of Assets) May 4 Paid Prudential Guarantee and Assurance, Inc. P14,400 for a one- . year comprehensive insurance coverage on the service vehicle. Analysis An asset increased. Another asset decreased. Rules Increases in assets are recorded by debits. Decreases in assets . are recorded by credits. Entry Increase in assets is recorded by a debit to prepaid insurance. Decrease in assets is recorded by a credit to cash. Dr. Cr. Prepaid Insurance (A) 14,400 Cash (A) 14,400 Office Equipment Acquired on Account (Exchange and Source of Assets) May5 Acquired office equipment from Fair and Square Emporium for P60,000; paying P15,000 in cash and the balance next month. Note: A compound entry is needed for this transaction. Analysis Assets increased. Assets decreased. Liabilities increased. Rules Increases in assets are recorded by debits. Decreases in assets are recorded by credits. Increases in liabilities are recorded by credits.Recording Business Transactions _|_3-9 Entry Increase in assets is recorded by a debit to office equipment. Decrease in assets is recorded by a credit to cash. Increase in liabilities is recorded by a.credit to accounts payable. Dr. cr Office Equipment (A) 60,000 Cash (A) 15,000 45,000 Accounts Payable (L) Supplies Purchased on Account (Source of Assets) May 8 Purchased supplies on credit for P18,000 from San Jose Merchandising. Analysis , Assets increased. Liabilities increased. : Rules Increases in assets are recorded by debits. Increases in liabilities are recorded by credits. Entry Increase in assets is recorded by a debit to supplies. Increase in liabilities is recorded by a credit to accounts payable. Dr. Cr. Supplies (A) 18,000 Accounts Payable (L) 18,000 i Accounts Payable Partially Settled (Use of Assets) May 9 Paid San Jose Merchandising P10,000 of the amount owed. Analysis. Assets decreased. Liabilities decreased. Rules Decreases in assets are recorded by credits. Decreases in liabilities are recorded by debits. Entry Decrease in liabilities is recorded by a debit to accounts payable. Decrease in assets is recorded by a credit to cash. Dr. cr. ‘Accounts Payable (L) 10,000 Cash (A) 10,000 ——— kl808@—— coRevenues Earned and Cash Collected (Source of Assets) May 10 Coordinated and finalized simple bridal arrangements for three couples and collected fees of P8,800 per couple. Services include prospecting and selecting the church and reception location, couturier, caterer, car service, flowers, souvenirs and invitations. Analysis Assets increased. Owner's equity increased Rules Increases in assets are recorded by debits. Increases in owner's equity are recorded by credits. Entry Increase in assets is recorded by a debit to cash. Increase in owner's equity is recorded by a.credit to consulting revenues. Dr. Cr. Cash (A) 26,400 Consulting Revenues (OE:1) 26,400 Salaries Paid (Use of Assets) May 13 Paid salaries, P6,600. The entity pays salaries every two Saturdays (refer to the calendar in Chapter 4). Analysis Assets decreased. Owner's equity decreased. Rules Decreases in assets are recorded by credits. Decreases in owner's equity are recorded by debits. Entry Decrease in owner's equity is recorded by a debit to salaries expense. Decrease in assets is recorded by a credit to cash. Dr. Cr. Salaries Expense (OE:E) 6,600 Cash (A) 6,600 Unearned Revenues Collected (Source of Assets) May 15 The entity is earning additional revenues by referring consulting clients to friendly hotels, caterers, printers, and couturiers. Received P10,000 advance fees for three clients referred. Analysis Assets increased. Liabilities increased.Recording Bt Rules Entry Increases in assets are recorded by debits. Increases in liabilities are recorded by credits. Increase in assets is recorded by a debit to cash. Increase in { liabilitiesjis recorded by a credit tolunear Dr. Cr. Cash(A) 10,000 Unearned Referral Revenues (L) 10,000 Revenues Earned on Account (Source of Assets) May 19 Analysis Rules Entry Coordinated and finalized elaborate bridal arrangements for three couples and billed fees of P12,000 per couple. Additional services include documents preparation, consultation with a feng shui expert as to the ideal wedding date for prosperity and harmony, provision for limousine service and honeymoon trip. Assets increased. Owner's equity increased. Increases in assets are recorded by debits. Increases in owner's equity are recorded by credits. Increase in assets is recorded by a debit to accounts receivable. Increase in owner's equity is recorded by a credit to consulting revenues. . Dr. Cr. Accounts Receivable (A) 36,000 Consulting Revenues (OE:!) 36,000 Withdrawal of Cash by Owner (Use of Assets) May 25 Analysis * Rules Entry Besario withdrew P14,000 for personal expenses. Assets decreased. Owner's equity decreased. Decreases in assets are recorded by credits. Decreases in owner's equity are recorded by debits. Decrease in owner's equity is recorded by a debit to Besario, Withdrawals. Decrease in assets is recorded by a credit to cash.a Ballada 3-12 | Basic Financial Accounting and Reporting 2022 Edition by Prof. WIN Ballgt? Dr. Cr. Besario, Withdrawals (OE) 14,000 14,000 \ Cash (A) ' _ eeeeo"=141 Salaries Paid (Use of Assets) May 27 Paid salaries, P7,200. Analysis Assets decreased. Owner's equity decreased. - Rules Decreases in assets are recorded by credits. Decreases in owner's equity are recorded by debits. Entry Decrease in owner's equity is recorded by a debit to salaries expense. Decrease in assets is recorded by a credit to cash. Dr. cr. Salariés Expense (OE:E) 7,200 Cash (A) 7,200 Expenses Incurred but Unpaid (Exchange of Claims) May 30 Received the ICC-BayanTel telephone bill, P1,400. Analysis Liabilities increased. Owner's equity decreased. Rules Increases in liabilities are recorded by credits. Decreases in owner's equity are recorded by debits, Entry Decrease in owner's equity is recorded by a debit to utilities expense. Increase in liabilities is recorded by a credit to utilities payable. Dr. Cr. Utilities Expense (OE:E) 1,400 Utilities Payable (L) 1,400 Accounts Receivable Partially Collected (Exchange of Assets) May 30 Received P24,000 from two clients for services billed last May 19. Analysis An asset increased. Another asset decreased. Rules Increases in assets are recorded by debits. Decreases as credits.es Recording Business Transactions | 3-13 E intry Increase in assets is recorded by a debit to cash. Decrease in assets is recorded by a credit to accounts receivable. ’ ' Dr jy Cr. Cash (A) 24,000 Accounts Receivable (A) 24,000 | T Expenses Incurred and Paid (Use of Assets) May 31 Settled the electricity bill of P3,000 for the month. Analysis, Assets decreased. Owner's equity decreased. Rules Decreases in assets are recorded by credits. Decreases in owner's equity are recorded by debits. Entry Decrease in owner's equity is recorded by a debit to utilities expense. ‘Decrease in assets is recorded by a credit to cash. Dr. cr. Utilities Expense (OE:E) 3,000 Cash (A) 3,000 THE LEDGER A\grouping of the entity’s accounts’is referred to as allédger) Although some firms may use various ledgers to accumulate certain detailed information, all firms have a general ledger. Algeneral ledger is the "reference book" of the accounting system and is used to ° classify and summarize transactions, and to prepare data for basic financial statements. The accounts in the general ledger are(elassified intojtwoigeneral groups} 1. [balance’sheet or permanent accounts (assets, liabilities and A ir ). Temporary ‘or nominal accounts are used to gather information for a particular accounting period. At the end of the period, the balances of these accounts are transferred ermanent owner's equi unt! “toa pr uity acco Every account in the ledger maintains the basic format of the T-account but offers more information (e.g. the account number tthe upper right corner and the journal reference column). \Compared to’a|journal, a a3-14 | Basic Financial Accounting and Reporting 2022 Edition by Prof. WIN Ballada cc, CHART OF ACCOUNTS e accounts and their.account numbers in the ledger is known as the The chart is arranged in the financial statement order,'that is, assets, lowed by liabilities, owner's equity, income and expenses? The accounts should be numbered in a flexible manner to permit indexing and cross-referencing.. \arsiatianestanszcogy. tne acco he chart of accounts to identify the pertinent acco! increased or decreased. If an appropriate account title is not listed in the chart, an additional account may be added. Presented below is the chart of accounts for the illustration: A listing of : Weddings “R” Us Chart of Accounts Balance Sheet Accounts Income Statement Accounts Assets Income 110 Cash 410 Consulting Revenues 120 Accounts Receivable 420 Referral Revenues 130 Supplies 140 Prepaid Rent Expenses 150 Prepaid Insurance $10 _ Salaries Expense 5 160 Service Vehicle 520 Supplies Expense 165 Accumulated Depreciation 530 Rent Expense 170 Office Equipment 540 Insurance Expense 175 Accumulated Depreciation 550 Utilities Expense abilities 560 Depreciation Expense- 210 Notes Payable Service Vehicle 220 Accounts Payable} 570 Depreciation Expense- 230 Salaries Payable Office Equipment 240 — Utilities Payable "$80 Miscelianeous Expense 250 Interest Payable 590 Interest Expense A 260 Unearned Referral Revenues ’ Owner's Equity ‘ 310 Besario, Capital ‘ 320 —_Besario, Withdrawals ‘ j 330 Income Summary ‘ 1 POSTING (Step 3) ’ means transferring the amounts from the journal to the appropriate accounts in the er. Debits in the journal are posted as debits in the ledger, and credits in the journal as credits in the ledger. The steps are illustrated as follows:Recording Business Transactions | 1. [Transfer the ie transaction from the journal to the latelOf the transaction from the j I to the ledger. 2 * ber from the journal je | , “column of the ledger. journal to the journal reference (J.R:) 3. i (Post the debit figure|from the journal as a debit figure in the ledger and the “credit figurelfrom the journal as a credit figure in the ledger. 4 berfin the posting reference column of the journal once» “the figure has been posted to the ledger. The Journal ® page 1 Date Account Titles and Explanation PLR. Debi Credit 2] aon 2 [May 1 | Cash 3 Besario, Capital 2 Initial investment. The Ledger Account: Cash ' \ Account No. 110 Date Explanation JR. | Debit! fi Credit Balance Two iN +2 | May 1 +1 [250,000] \ 250,000 Account: Besario, Capital Account No. 310 Date Explanation JR. | Debit Credit | Balance 1 2021 >» 2 | May 1 . J 250,000 | _250,000 4 a LEDGER ACCOUNTS AFTER POSTING Atth i, the debit or credit balance of each account must be determi come up with a trial balance. ‘all the debits and «Each “credits. © If the sur eater than the sum of its credits, that account has ifthe sun greater, that account has alereditibalance. '3-16 | Basic Financial Accounting and Reporting 2022 Edition by Prof. WIN Ballada Illustration. The ledger accounts of Weddings “R” Us after costing are shown below, The account numbers and journal reference collimns are purposely omitted. The balance of each account has been determined. cash lisesi May 1 250,000] May i 8,000 May 2 210,000 2 210,000 4 420,000 ‘ Balance — 210,000 10 26,400 4 14,400 15 10,000 5 15,000 Accounts Payable 30 24,000 9 10,000 May 9 10,000] May 5 45,000 13 6,600 8 __ 18,000 25 © 14,000 277,200 Balance 53,000 31 3,000 $20,400 498,200, Balance 22,200 Utilities Payable May 30 1,400 . Balance 1,400 Accounts Receivable Unearned Referral Revenues May 19 36,000] May 31 24,000 May 15 __ 10,000 Balance 12,000 Balance 10,000 Supplies Besario, Capital May 8 18,000 May 1 250,000 Balance 18,000 Balance — 250,000 Prepaid Rent Besario, Withdrawals May 1 __ 8,000 May 25 _14,000 Balance 8,000 ° Balance 14,000 Prepaid insurance Consulting Revenues May 4 14,400 May 10 26,400 Balance 14,400 Balance 62,400 Service Vehicle Salaries Expense May 4 420,000 May 13 6,600 Balance - 420,000 27 __7,200 Balance 13,800 Office Equipment Utilities Expense ‘May 5 60,000 May 30 1,400 Balance 60,000 31 __ 3,000 Balance 4,400Recording TRIAL BALANCE (Step 4) ame: alist of all accounts with their respective debit or credit balances. It 's to verify the equality of debits and credits'in the ledgervat the end of each accounting period or at any time the postings are updated. The procedures in the Preparation of a trial balance follow: 1. List the account titles in numerical order. 2. Obtain the account balance of each account from the ledger and enter the debit balances in the debit column and the credit balances in the credit column. * 3. Add the debit and credit columns. 4. Compare the totals. g errors. When the {sal ae eal he il bles toc This equality provides an interim proof of the accuracy of the records but it does not signify the absence of errors. For example, if the bookkeeper failed to record payment of rent, the trial balance columns are equal but in reality, the accounts are incorrect since rent expense is understated and cash overstated. i The trial balance for the illustration follows:, \ } Weddings “R” Us , Trial Balance May 31, 2021 Cash 1 P 22,200 * Accounts Receivable, 12,000 . , Supplies! 18,000 ' Prepaid Rent 8,000 . Prepaid Insurance 14,400 Service Vehicle 420,000 Office Equipment 60,000 Notes Payable 210,000 Accounts Payable 53,000 ‘ Utilities Payable 1,400 Unearned Referral Revenues 10,000 Besario, Capital 250,000 Besario, Withdrawals 14,000 ¢ Consulting Revenues 62,400 Salaries Expense 13,800 Utilities Expense ¢ ago ; P586,800 __P586,800Ballada 3-18 | Basic Financial Accounting and Reporting 2022 Edition by Prof. WIN BOUTEE LOCATING ERRORS. An setae yppthentoralsnorecTepat etenisnereul® would ‘automatically signal the, presence error, These errors include: 1. Error in posting a transaction to the ledger: © anerroneous amount was posted to the account. © adebit entry was posted as a credit or vice versa. 0 ~ adebit or credit posting was omitted. 2, Error in determining the account balances: 0 a balance was incorrectly computed. 9 abalance was entered in the wrong balance column. 3. Error in preparing the trial balance: © one of the columns of the trial balance was incorrectly added. i © _ the amount of an account balance was incorrectly recorded on tHe trial balance. | 9 A debit balance was recorded on the trial balance as a cretlit or vice versa, or a balance was omitted entirely. What is the most efficient approach in |locating/an error? The following procedures when done in sequence may save considerable time and effort in locating errors: opposite dire 2. If the error does not lie in addition, determine the exact amount by which the trial balance is out of balance. The amount of the discrepancy is often a clue to the source of the error. TENE eveomcrstauaeianrasy this suggests either 2 ion (reversing the order of numbers) error or afslide) (moving of the al point).” For example, assume that the cash account balance is P21,750, but in copying the balance into the trial balance the figures are transposed and written as P21,570. The resulting error amounted to P180 and is divisible by 9, Another common error is the slide, or incorrect placement of the decimal point, as when P21,750.00 is copied as P2,175.00. The resulting discrepancy in the trial balance will also be an amount divisible by 9. Assume that the office equipment account has a debit balance of P42,000 but its erroneously listed in the credit column of the trial balance. This will cause 4 42,000 or P84,000 in the trial balance totals. since such errors as recording a debit in a credit column are common, it is advisable, after determining the discrepancy in the trial balance totals, to scan the columns for an {amount equal to exactly one-half of the discrepancy.”Recording Business Transactions | 3-19 itis also advisable tojlook over the transactions'for an item of the exact amount of the discrepancy. An error may have been made by recording the debit side of the transaction and forgetting to enter the credit side. in the'trial balance with that in the ledger. Be” 4. |Recompute the balance of each ledger account, 5. (Tra tings from the journal to the ledger accounts. ‘As this is done, place a “check mark it journal and in the ledger after each figure is verified. When the operation is completed, look through the journal and the ledger for unchecked amounts. In tracing postings, be alert not only for errors in amount but also for » debits entered as credits, or vice versa. , Note that ‘even when a trial balance is in balance, the accounting records may still. in’errors. ‘A balanced trial balance simply proves that, as recorded, debits equal » “credits. "The following errors are not detected by a trial balance: 1. Failure to record or post a transaction. 2. Recording the same transaction more than once. 3. Recording an entry but with the same erroneous debit and credit amounts. 4. Posting a part of a transaction correctly as a debit or credit but to the wrong account.