A Trial Balance is a listing of all the
assets, liabilities, capital, revenue and expenses account balances at one
point in time.
Purpose of the Trial Balance
1. It
indicates if the ledger is in balance by showing whether the total accounts
with debit balances equals the total accounts with credit balances.
2. It
aids in allocating errors.
3. It
assists in the preparation of financial statement
A trial balance in which debits equals credits is not necessarily error-free. A trial balance may contain errors but still
look correct if:
1. No entry was made for a given
transactions.
2. An entry was posted twice.
3. An amount was journalized or
posted to the wrong account.
4. An incorrect amount was
recorded for a given transaction.
Transposition Error Example: P864 is written or posted
as P684 or P468.
Slide Error Example: P684.00 is written or posted as
P68.40 or P6.84.
Procedure to Correct Errors in Journalizing and
Posting:
- Draw a straight horizontal-line through the error and insert the correct title or amount if the entry is incorrect or the posting is incorrect.
- Make a correcting entry and post it to correct wrong entry already posted.
Correcting
Entry is an entry made to correct an error in a journal entry discovered
after posting.