Accountancy · Ch 6 — Trial Balance and Rectification of Errors
Searching of Errors
Searching of Errors
Searching of Errors
When a trial balance does not tally, it is a clear signal that at least one error has occurred. The error — or errors — must be located and corrected before the financial statements can be prepared. The accountant should follow a systematic procedure to detect and locate the mistake.
Steps to Locate Errors
1. Recast the totals of the debit and credit columns of the trial balance. A simple totalling mistake is the most common cause of a mismatch.
2. Compare each account head and amount appearing in the trial balance with the corresponding account in the ledger. This helps detect any difference in amount or the complete omission of an account from the trial balance.
3. Compare the current year's trial balance with the previous year's. This check reveals:
- Additions or deletions of accounts
- Large differences in amounts that are neither expected nor explained
4. Recompute the balances of individual accounts in the ledger to verify their correctness.
5. Re-check the posting from the books of original entry (journal, cash book, etc.) into the ledger accounts.
Using the Difference Amount to Pinpoint Errors
The size and nature of the difference between the debit and credit totals can give strong clues about the type of error.
Difference divisible by 2 — If the difference is exactly divisible by 2, an amount equal to half the difference may have been posted to the wrong side of another ledger account.
Example: If the debit column exceeds the credit column by ₹1,500, it is possible that a credit item of ₹750 was wrongly posted as a debit in the ledger. The accountant should scan all debit entries of ₹750 to locate the error.
Difference equal to a specific amount — The difference may also indicate the complete omission of a posting of that amount.
Example: The same difference of ₹1,500 could be due to the omission of a posting of ₹1,500 on the credit side. The accountant should verify all credit items of ₹1,500.
Difference divisible by 9 — If the difference is a multiple of 9 (i.e., divisible by 9), the mistake is likely a transposition of figures (digits written in the wrong order) or a wrong placement of the decimal point.
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