Learn CBSE Accountancy Index Terms for Class 11, Chapter 6 Trial Balance and Rectification of Errors
1. Trial balance – Trial balance is a statement that accounts for all the balances of the personal account, real account, and nominal account regardless of either Revenue or Capital A/c. It comprises two columns which are debit and credit. If the transactions are documented systematically by providing a dual-sided effect and later posted methodically, then the total of both columns would be similar.
In other words, a trial balance is a worksheet record book that reflects the debit and credit balance of all the registered accounts. This worksheet statement is used to prepare the final account report of the company. The trial balance also determines the accuracy of the account. However, it doesn’t ensure that the account is error-free but surely gives mathematical precision.
2. Total Method – While preparing the trial balance, the total method is used by totalling the balance of the credit and debit is determined in an individual column and displayed in the trial balance. Both columns’ total should be equal as it is based on the double-entry system.
3. Balance Method – While preparing the trial balance, the balance method is used widely and is prepared by determining the balance of all the ledger accounts and then summing up the debit and credit total of the trial balance to ensure accuracy.
4. Total Cum Balance Method – This method is the amalgamation of both the total and balance method. In this method, four columns for the amount are made; two for writing credit and debit totals and the other two for the credit and debit balance of the account.
5. Error of Principle – Error of principle is said to occur when the accountant records a transaction that does not comply with the rules of accounting. As per accounting rules, for every debit, there should be a corresponding credit.
When a transaction violates this rule, an error results from it, and such an error is known as the error of principle. Recording such a transaction does not have an impact on the trial balance, it simply means transactions are recorded but in incorrect accounts.
6. Clerical Errors – Clerical errors are those errors that are generated from the improper recording of transactions.
7. Error by Omission – Errors of omission are those types of errors that are generated when the accountant forgets to record an entry. There can be two variations of such errors, one is the complete omission of a transaction in which the transaction is not recorded in books of accounts.
The second type of error is partial omission, in which the accountant records the transaction on either the debit or credit side and forgets to record the transaction on the opposite side.
8. Error by Commission – These types of errors result from the negligence of the person who is in charge of recording the transactions. These types of errors have an impact on the trial balance and examples of such errors can be the recording of incorrect amounts and incorrect totalling in the ledger or subsidiary books or posting on the wrong side of ledger accounts.
9. Compensating Error – Compensating errors occur when one wrong entry neutralises the impact of another incorrect entry. These entries cancel the other error that is recorded.
10. Rectification of Errors – The errors can occur both on the debit and credit side of the account and need to be corrected or rectified by passing a journal entry to correct the debit and credit.
An error can be rectified by reversing the impact of the wrong entry on the debit and credit side and restoring the correct debit and credit entry.
Whenever there is excess credit or shortage in debit, then debiting the concerned account is done, similarly when there is a shortage of credit and excess of debit, then the concerned account should be credited.
In other words, the rectification of errors is referred to as the procedure of revising mistakes made in recording transactions. These mistakes can occur while posting entries to ledger accounts, classifying accounts, carrying a balance forward, etc.
11. Suspense Account – A suspense account is an account of the general ledger that is used for the temporary recording of business transactions. The need for a suspense account arises due to the inability to identify the appropriate ledger account for the recorded transaction.
The amounts or transactions that are moved to the suspense account are for a very short duration as there is a need for proper investigation to determine the correct ledger account to which the recorded amount should be moved or posted.
We hope that the offered Accountancy Index Terms for Class 11 with respect to Chapter 6: Trial Balance and Rectification of Errors, will help you.
Related Links:
- Class 11 Accountancy Terms Part I – Chapter 1: Introduction to Accounting
- Class 11 Accountancy Terms Part I – Chapter 2: Theory Base of Accounting
- Class 11 Accountancy Terms Part I – Chapter 3: Recording of transactions – I
- Class 11 Accountancy Terms Part I – Chapter 4: Recording of Transactions – II
- Class 11 Accountancy Terms Part I – Chapter 5: Bank Reconciliation Statement
- Class 11 Accountancy Terms Part I – Chapter 7: Depreciations, Provisions, and Reserves
- Class 11 Accountancy Terms Part II – Chapter 1: Financial Statements I
- Class 11 Accountancy Terms Part II – Chapter 2: Financial Statements II
- Class 11 Accountancy Terms Part II – Chapter 3: Accounts from Incomplete Records
- Class 11 Accountancy Terms Part II – Chapter 4: Applications of Computers in Accounting
