NCERT Book Class 11 Accountancy Trail Balance and Rectification of Errors

Trial Balance and Rectification of Errors

In the earlier chapters, you have learnt about the basic principles of accounting that for every debit there will be an equal credit. It implies that if the sum of all debits equals the sum of all credits, it is presumed that the posting to the ledger in terms of debit and credit amounts is accurate. The trial balance is a tool for verifying the correctness of debit and credit amounts. It is an arithmetical check under the double entry system which verifies that both aspects of every transaction have been recorded accurately. This chapter explains the meaning and process of preparation of trial balance and the types of errors and their rectification.

6.1 Meaning of Trial Balance

A trial balance is a statement showing the balances, or total of debits and credits, of all the accounts in the ledger with a view to verify the arithmatical accuracy of posting into the ledger accounts. Trial balance is an important statement in the accounting process. which shows final position of all accounts and helps in preparing the final statements. The task of preparing the statements is simplified because the accountant can take the account balances from the trial balance instead of looking them up in the ledger. In the earlier chapters, you have learnt about the basic principles of accounting that for every debit there will be an equal credit. It implies that if the sum of all debits equals the sum of all credits, it is presumed that the posting to the ledger in terms  of debit and credit amounts is accurate. The trialbalance is a tool for verifying the correctness of debit and credit amounts. It is an arithmeticalcheck under the double entry system which verifies that both aspects of every transaction have been recorded accurately. This chapter explains the meaning and process of preparation of trial balance and the types of errors and their rectification.

6.1 Meaning of Trial Balance

A trial balance is a statement showing the balances, or total of debits and credits, of all the accounts in the ledger with a view to verify the arithmatical accuracy of posting into the ledger accounts. Trial balance is an important statement in the accounting process. which shows final position of all accounts and helps in preparing the final statements. The task of preparing the statements is simplified because the accountant can take the account balances from the trial balance instead of looking them up in the ledger.

6.2.1 To Ascertain the Arithmetical Accuracy of Ledger Accounts

As stated earlier, the purpose of preparing a trial balance is to asceitain whether all debits and credit are properly recorded in the ledger or not and that all accounts have been correctly balanced. As a summary of the ledger, it is a list of the accounts and their balances. When the totals of all the debit balances and credit balances in the trial balance are equal, it is assumed that the posting and balancing of accounts is arithmetically correct. However, the tallying of the trial balance is not a conclusive proof of the accuracy of the accounts. It only ensures that all debits and the corresponding credits have been properly recorded in the ledger.

6.2.2 To Help in Locating Errors

When a trial balance does not tally (that is, the totals of debit and credit columns are not equal), we know that at least one error has occured. The error (or errors) may have occured at one of those stages in the accounting process: (1) totalling of subsidiary books, (2) posting of journal entries in the ledger, (3) calculating account balances, (4) carrying account balances to the trial balance, and (5) totalling the trial balance columns.

Questions for Practice

Short Answers

1. State the meaning of a trial balance?

2. Give two examples of errors of principle?

3. Give two examples of errors of commission?

4. What are the methods of preparing trial balance?

5. What are the steps taken by an accountant to locate the errors in the trial balance?

6. What is a suspense account? Is it necessary that is suspense account will balance off after rectification of the errors detected by the accountant? If not, then what happens to the balance still remaining in suspense account?

7. What kinds of errors would cause difference in the trial balance. Also list examples that would not be revealed by a trial balance?

8. State the limitations of trial balance?

Long Answers

1. Describe the purpose for the preparation of trial balance.

2. Explain errors of principle and give two examples with measures to rectify them.

3. Explain the errors of commission and give two examples with measures to rectify them.

4. What are the different types of errors that are usually committed in recording business transaction.

5. As an accounts for a company, you are disappointed to learn that the totals in your new trial balance are not equal. After going through a careful analysis, you have discovered only one error. Specifically, the balance of the Office Equipment account has a debit balance of Rs. 15,600 on the  trial balance. However, you have figured out that a correctly recorded creditpurchase of pendrive for Rs 3,500 was posted from the journal to the ledger with a Rs. 3,500 debit to Office Equipment and another Rs. 3,500 debit to creditors accounrts. Answer each of the following questions and present the amount of any misstatement :

(a) Is the balance of the office equipment account overstated, understated, or correctly stated in the trial balance?

(b) Is the balance of the creditors account overstated, understated, or correctly stated in the trial balance?

(c) Is the debit column total of the trial balance overstated, understated, or correclty stated?

(d) Is the credit column total of the trial balance overstated, understated, or correctly stated?

(e) If the debit column total of the trial balance is Rs. 2,40,000 before correcting the error, what is the total of credit column.

Please refer to attached file for NCERT Class 11 Accountancy - Trail Balance and Rectification of Errors