Accounting Errors that affects trial balance


Errors in extracting a trial balance

There are a number of errors which can be made during extraction of the trial balance.  These errors are either arithmetic or clerical in nature.

a)         Arithmetic errors
            Arithmetic errors occur where there is an incorrect arithmetic computation during addition or subtraction.  These can occur at any stage from the initial recording of a source document in books of original entry up to the stage of summing the trial balance debit and credit columns.

b)         Clerical errors
            These errors are a result of shortcomings in recording other than computational.  They manifest themselves through inaccurate recording of transactions or in omissions to record transactions or entries altogether.   For example, the amount recorded in the journal is shs. 1,000 and this was posted to the ledger as shs. 100.  Or there could be a transposition of digits when copying an amount, let us say shs. 7,910 being entered as shs. 7,190.  It is also possible to fail to post either a debit or a credit amount from the journal to the ledger.

These errors may result in inequality of the trial balance totals.  When this happens, it is necessary to locate the error by checking all arithmetical computations and clerical recording.  The following steps are usually taken:

            i]          re-casting of the trial balance, establishing the exact difference, looking for any entry with the amount similar to the difference that may not have been listed on the trial balance,

            ii]         checking whether all ledger balances have been correctly transferred to the appropriate debit and credit columns of the trial balance. It is common practice to divide the trial balance difference by two and the resulting amount might be a debit balance posted as a credit or vice versa,

            iii]        re-casting and balancing of ledger accounts,

            iv]        ensuring that all posting from books of original entry to the ledger accounts are correct, and

            v]         checking whether all recording and summaries of transactions from source documents to books of original entries are correct.

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