Accounting errors that trial balance can not disclose


Nevertheless, the equality of the trial balance totals does not guarantee that no errors have been made in the recording process.  There are a number of errors which a trial balance may not disclose.  Following are some of such errors:

a)         Error of omission
            If a transaction is completely left out, both the debit entry and credit entries are omitted and therefore the trial balance totals will still be equal.  For example, a sales invoice might have been overlooked and not recorded in the journal.   This missing entry will not be disclosed by preparation of the trial balance.  Ensuring that all source documents are stamped or marked to show that they have been recorded may prevent this error.

b)         Error of commission
            This type of an error occurs when a transaction is recorded as a debit and credit but in a wrong account, which has a resembling title.  Since both the debit and credit amounts have been entered correctly, the trial balance totals will be equal.  For example, a credit to Tanzania Grocers instead of Tanzania Growers for purchases on account will not affect the equality of the trial balance.  Such errors may be discovered when a firm confirms balances with customers and suppliers, or when a customer settles an invoice which is not on her account.

c)         Error of principle
            This kind of error is similar in effect, to error of commission in that a wrong account is used in recording a transaction.  However, the error may be due to lack of knowledge  or oversight in accounting principles. For example, purchase of office supplies recorded as a debit to purchases account instead of the office supplies account. This error will not affect agreement of the trial balance. Checks on reasonableness of balances in accounts involved may guide to existence of errors. For example office supplies may have a large amount above the norm. This kind of error is difficult to discover and may be prevented only by employing trained and competent bookkeepers and accountants.

d)         Compensating errors
            These errors occur when an incorrect entry on the debit side is offset by another error on the credit side in the same or different account.   For example a discount allowed of shs. 1,000 debit was not posted and similarly a purchase returns of shs. 1,000 credit was omitted.  In this case both the debit and credit totals of the trial balance will be short by shs. 1,000 but will still be equal. This type of error may also go undetected unless careful routine review of the records is made by competent personnel.

e)         Error of original entry
            This type of error originates from the books of prime entry.  These errors arise when a source document is incorrectly recorded in books of prime entry.  If for example a sales invoice for shs. 600,0n00 is recorded in the sales journal as shs. 60,000 all subsequent posting of both debit and credit entries will be based on an incorrect figure. The trial balance will not discover such an error. Checking for reasonableness of account balances and confirmation of balances with customers and suppliers may lead to detection of such errors.

f)         Error of complete reversal
            This type of error occurs when the double entry is completely reversed during posting. For example a payment for wages being recorded as a debit to the bank account and as a credit to the wages expense account. Checking for reasonableness of account balances and confirmation of balances with banks, customers and suppliers may lead to detection of such errors.

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