Question

A trial balance may agree in case of__________.

• A. wrong balancing of accounts
• B. posting to wrong side of correct a/c
• C. posting correct amount to correct side of wrong a/c
• D. partial omission of the transaction

Answer 1

Answer: (C)

posting correct amount to correct side of wrong a/c

A trial balance is a list of the closing balances of all the ledger accounts and usually the first step in the preparation of final accounts. A trial balance may be a test of mathematical accuracy when the debit side equals the credit side. However, it does not necessarily mean that the ledgers are made with accounting accuracy. Thus a trial balance may agree when the debit side equals the credit side even if there are some errors. There can be following types of errors:

1. Error of principle: An error of principle is an error which violates the fundamentals of book keeping. For example, purchase of furniture is debited in the Purchase A/c (Expense A/c) instead of Furniture A/c (Asset A/c), then the debit side of the trial balance will still agree with the credit side but the principles of book keeping will be violated.
2. Compensatory error: An incorrect debit entry being offset by an equal credit entry or vice versa may allow the trial balance to agree. For example, if one account in the ledger is debited Rs. 100 less and another account in the ledger is credited Rs. 100 less, then these errors will cancel out each other. This means that one error is neutralised by another same error on the opposite side, allowing the trial balance to agree.
3. Error of omission: If a transaction is completely omitted that is both the aspects of an entry are omitted to be recorded in the double entry book keeping system, the trial balance will still agree.
4. Error of amount in original book: If an invoice of Rs. 943 has been recorded in the sales book as Rs. 934, the trial balance will come out correctly since the debit and the credit side have been recorded with Rs. 934. Thus, the trial balance will show arithmetical accuracy and will tally in spite of the error.
5. Posting to wrong account: This means posting an item to the wrong account but on the correct side with correct amount. For example, a purchase of Rs. 500 is credited in the account of Shamu instead of Shama. Such an error will not be deducted by the trial balance and it will still agree.