Trial Balance Errors

On the basis of nature errors can be classified into four types. They are

(i) Errors of Omission,

(ii) Errors of Commission,
(iii) Errors of Principle, and
(iv) Compensating Errors

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Errors of Omission
Errors of omission may be caused at the time of recording the transactions in the books of original
entry or at the time of posting to the ledger.

Errors of omission are of two types. They are

 Complete Omission
 Partial Omission

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 Complete Omission
Complete omission means the transaction which is completely omitted to be recorded in the books
of original entry and thus cannot be posted in ledger or though recorded in the journal/journal
proper but omitted to be posted in the ledger completely.

These errors do not affect the agreement of trial balance.

Example
Goods sold to M/s Vanitha for cash but not recorded in the Journal.

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 Partial Omission
Errors of partial omission mean errors of omission other than the errors of complete omission.

In other words, when a transaction is partly recorded in ‘he books of accounts, it is known as error of
partial omission.

These errors affect the agreement of trial balance.

Example
Goods sold to Harish on credit recorded in the sales book but omitted to be posted to Harish’s
Account.

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II. Errors of Commission
Errors of commission include errors caused due to

 wrong recording of transactions,

 wrong casting of the subsidiary books,
 wrong totaling or balancing of the accounts,
 wrong posting and wrong carry forward.

These errors may or may not affect the agreement of trial balance.

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 Error of Recording

Error of recording arises when a transaction is recorded in the books of original entry incorrectly.

These errors do not affect the agreement of trial balance.

Example 1:
Goods worth Rs. 2,000 sold to Vinay on credit has been recorded in the sales book for Rs. 20,000.

Example 2:
Goods worth Rs. 50,000 purchased from Mohan on credit has been recorded in the purchase book for Rs. 5,000.

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 Error of Casting of Subsidiary Books

Error of casting arises due to wrong totaling of some subsidiary books including cash book.

These errors affect the agreement of trial balance.

Example
Sales book has been short totaled by Rs. 10,000. Due to this error, Sales Account shall show short
balance of Rs. 10,000. Resultantly, credit side of the trial balance shall be decreased by Rs. 10,000.

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Error of Totalling or Balancing of Accounts

Error of balancing arises due to wrong balancing of some ledger accounts.

These errors affect the agreement of trial balance.

Example
Furniture Account has been balanced in excess by Rs. 5,000. Due to this error, there would be an excess
debit balance in Furniture Account. Resultantly, debit side of the trial balance shall be increased by Rs.
5,000.

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Error of Posting
Error of posting arises when a transaction is correctly recorded in the books of original entry including
journal but posted wrongly in ledger accounts.

These errors may or may not affect the agreement of trial balance.

Errors of posting may be further classified as under:

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Posting to the wrong side but correct account
In this case, posting is made in the correct account but on the wrong side.

These types of errors affect the agreement of trial balance.

Example:
Goods sold to Kavita for Rs. 2,500 on credit. Instead of posting on the debit side of Kavita’s Account, it
has been posted to the credit side of Kavita’s Account. Due to this error, instead of showing debit
balance of Rs. 2,500, Kavita’s Account shall show a credit balance of Rs. 2,500. Resultantly, credit
side of the trial balance shall be increased by Rs. 5,000. Rs. 2,500 for not showing under the debit
balance and Rs. 2,500 for wrong showing under the credit balance.

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Posting to the wrong account but correct side
In this case, posting is made to the wrong account but on the correct side.

These errors do not hamper the agreement of trial balance.

Example:
Goods sold to Shyam for Rs. 16,500 on credit. Instead of posting on the debit side of Shyam’s Account,
it has been posted to the debit side of Ram’s Account. Due to this error, instead of showing debit
balance of Rs. 16,500 in Shyam’s Account, Ram’s Account shall show a debit balance of Rs. 16,500.
Resultantly, agreement of trial balance shall not be affected.

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Posting of wrong amount
In this case, posting is made with the wrong amount but in the correct
account and correct side.

These errors affect the agreement of trial balance.

Example:
Goods sold to Shiva for Rs. 40,000. Instead of posting an amount of Rs. 40,000 on the debit side of
Shiva’s Account, the amount has been posted as Rs. 4,000 on the debit side of Shiva’s Account. Due
to this error, Shiva’s Account shall show a reduced debit balance of Rs. 36,000 (i.e., difference
between Rs. 40,000 and Rs. 4,000). Resultantly, total of trial balance shall not agree.

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Posting twice in a account

In this case, posting is made twice in the correct account and correct side.

These errors affect the agreement of trial balance.

Example:
A sum of Rs. 15,000 is paid to Rohan. Instead of posting an amount of Rs. 15,000 once on the debit
side of Rohan’s Account, the amount has been posted twice on the debit side of Rohan’s Account.
Due to this error, Rohan’s Account shall show an excess debit balance of Rs. 15,000. Resultantly, total
of trial balance shall not agree.

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Error in Carrying Forward

Error in carrying forward arises when a mistake is occurred in

carrying forward a total from one page to the next page.

These errors affect the agreement of trial balance.

Example:
Total of sales book is Rs. 8,500, however, it has been carried
forward as Rs. 5,800.

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III. Errors of Principle

Errors of principle means, errors caused due to violation of generally accepted accounting principles
viz. incorrect allocation between capital and revenue items.

It is worth mentioning that proper allocation between these two items is very important in the sense
that improper allocation would lead to wrong and misleading results through financial statements.

These errors would lead to understatement/overstatement of assets or expenses or liabilities or

incomes.

These errors do not disturb the agreement of trial balance.

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There may be two possibilities of occurrence of these errors viz:

(a) Treating capital items as revenue items and

(b) Treating revenue items as capital items.

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 Treating Capital Items as Revenue

In this case, capital items are wrongly treated as revenue items.

These errors do not affect the agreement of trial balance.

Example
Purchase of machinery worth Rs. 75,000 debited to purchases.

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Treating Revenue Items as Capital

In this case, revenue items are wrongly treated as capital items.

These errors do not affect the agreement of trial balance.

Example
Paid Rs. 200for repair of old machinery but debited to machinery.

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 IV. Compensating Errors

When two or more errors are committed in such a way that the effect of one error is compensated by
the effect of other, it is known as compensating errors.

It is worth mentioning that the net impact of these errors on the debits and credits of an account is
nil.

These errors do not disturb the agreement of trial balance.

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Example

A sum of Rs. 1,000 was paid to Rohit on 1.1.2020 but was posted in Rohit’s Account as Rs. 100.
Similarly, a sum of Rs. 100 paid to Rohit on 31.3.2020 was posted in Rohit’s Account as Rs. 1,000. In
this case, it can be observed that error of 1.1.2020 was compensated by the error of 31.3.2020.

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From the above it can be observed that there are some errors which can be revealed by the
preparation of trial balance and some errors which cannot be revealed by the preparation of trial
balance.

In other words, errors which affect the trial balance can be revealed by trial balance and errors which
do not affect the trial balance are not revealed by the trial balance.

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From the point of view of impact of errors on trial balance,
errors may be classified into the following two categories :

(a) errors disclosed by trial balance ( errors which affect the

agreement of the trial balance).

(b) errors not disclosed by trial balance ( errors which do not

affect the agreement of the trial balance).

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 ERRORS NOT DISCLOSED BY TRIAL BALANCE

The agreement of a trial balance is only a check of arithmetical accuracy of the ledger but it is not a
conclusive proof as to the absolute accuracy of the books. The following errors will not affect the
agreement of trial balance and hence are not disclosed by the trial balance:

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Errors of Complete Omission
Few Errors of Commission(Discussed above)
Errors of Principle
Compensating Errors

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 The following are some of the errors of Commission, which cause the Trial
Balance to disagree,

1. Wrong Totaling of Subsidiary Books:

2. Posting of the Wrong Amount:
If a wrong amount is posted in one of the two accounts, the Trial Balance
disagrees.

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3. Posting an Amount on the Wrong side of the Account:
For instance, a credit sales made to a customer for Rs 500 has been credited to the customer account,
instead of debit. As a result of this error, the credit side of the Trial Balance will exceed by Rs 1,000
(double the amount of the error) because there are two credits one in Sales Account and another in
Personal Account and no debit for the transaction.

4. Posting Twice to a Ledger:

For instance, salary of Rs 500 paid has been debited to Salary Account twice by mistake. This will
cause disagreement of Trial Balance in debit side by excess of Rs 500.

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