Significance of Agreement of Trial Balance

Significance of Agreement of Trial Balance

A trial balance that tallies — where total debits equal total credits — is an important checkpoint for any accountant. Normally, a tallied trial balance suggests that for every transaction, both the debit and the credit entries have been recorded correctly. It gives a reasonable assurance that the double-entry rule has been followed.

However, agreement of the trial balance is not absolute proof of accuracy. A tallied trial balance only proves, to a certain extent, that the posting to the ledger is arithmetically correct. It does not guarantee that the entry itself is correct. There can be errors that affect the equality of debits and credits (these will cause the trial balance to disagree), and there can be errors that do not affect the equality of debits and credits (these will leave the trial balance tallied even though the records are wrong).

Common Errors That May Still Exist Despite a Tallied Trial Balance

The following errors do not disturb the equality of debits and credits, so the trial balance will still tally:

• Error in totalling of the debit and credit balances in the trial balance itself.
• Error in totalling of subsidiary books (e.g., the Sales Book or Purchase Book).
• Error in posting of the total of subsidiary books to the ledger.
• Error in showing an account balance in the wrong column of the trial balance (e.g., a credit balance shown in the debit column), or in the wrong amount.
• Omission in showing an account balance in the trial balance (leaving out an entire account).
• Error in the calculation of a ledger account balance.
• Error while posting a journal entry: a journal entry may not have been posted properly to the ledger — posting made either with the wrong amount, or on the wrong side of the account, or in the wrong account.
• Error in recording a transaction in the journal: making a reverse entry (the account to be debited is credited and the account to be credited is debited), or an entry with the wrong amount. …