Facts that You Should Know about the Trial Balance

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:

1. 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.
2. 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.