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Errors of trial balance.

Trial balance is a statement containing the balance of all ledger accounts, at a particular date, arranged in the form of debit and credit columns, placed side by side and prepared with the objective of checking the arithmetical accuracy of ledger posting. Errors revealed by Trial balance. If trial balance does not agree, the disagreement may be due to: (i) Omission to post an amount into ledger: If an item is not posted from journal or subsidiary book to ledger, two sides of trial balance shall not agree for example if goods purchased on credit from Ram recorded properly in Rams book but not recorded in purchase book. (ii) Omission to post an amount in trial balance: If a balance of an account is not recorded in trial balance two sides of trial balance shall not agree which is an indication of error in accounts. (iii) Posting of wrong amount: If wrong amount is posted in one of the two accounts, there will be disagreement in trial balance like goods purchased worth Rs, 699 but posted with Rs. 969. It will create difference between two sides. (iv) Posting on the wrong side: When an item is posted on wrong side in ledger or trial balance then that will create a reason of error in trial balance like if discount allowed of Rs. 400 credited in discount account that will create a difference of Rs. 800 in trial balance. Errors not revealed by trial balance: (i) Error of omission: If a transaction is not recorded in journal then there will be no effect in trial balance. For eg. Goods sold to Amit not recorded in original book then there will be no debit and credit in ledger with this total of trial balance will agree. But in actual it is a mistake made by the accountant. (ii) Error of commission: when a wrong amount is being posted on both sides is called as error of commission. In such cases total of trial balance do not affected. For eg. Goods sold to Pankaj amounting Rs. 5000 recorded on both sides with Rs. 500. These errors are the results of carelessness of accountants. (iii) Compensating errors: This type of error overcomes the effect of error committed earlier. For examples earlier accountant forget to record the sales of Rs. 500 and after that he over posted transaction of sales with Rs. 500. That over posting of sales will neutralize the error. (iv) Error of principle: this error is occurred when an item of one account transferred to another principle account. For eg. Machinery purchased posted in purchase a/c or wages paid for installation of machinery debited to wages a/c etc. the trial balance remain unaffected in such errors.