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Chapter 6: Trial Balance and Rectification of Errors
I n 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.
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 as it shows the 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 balances of all accounts from the trial balance instead of going through the whole ledger.
It may be noted that the trial balance is usually prepared with the balances of accounts.
It is normally prepared at the end of an accounting year. However, an organisation may prepare a trial balance at the end of any chosen period, which may be monthly, quarterly, half-yearly or annually depending upon its requirements.
In order to prepare a trial balance following steps are taken: • Ascertain the balances of each account in the ledger. • List each account and place its balance in the debit or credit column, as the case may be.
(If an account has a zero balance, it may be included in the trial balance with zero in the column for its normal balance).
Compute the total of debit balances column. • Compute the total of the credit balances column. • Verify that the sum of the debit balances equals the sum of credit balances. If they do not tally, it indicate that there are some errors.
So one must check the correctness of the balances of all accounts. It may be noted that all assets expenses and receivables account shall have debit balances whereas all liabilities, revenues and payables accounts shall have credit balances.
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 occurred.
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.
It may be noted that the accounting accuracy is not ensured even if the totals of debit and credit balances are equal because some errors do not affect equality of debits and credits.
For example, the book-keeper may debit a correct amount in the wrong account while making the journal entry or in posting a journal entry to the ledger.
This error would cause two accounts to have incorrect balances but the trial balance would tally.
Another error is to record an equal debit and credit of an incorrect amount. This error would give the two accounts incorrect balances but would not create unequal debits and credits.
As a result, the fact that the trial balance has tallied does not imply that all entries in the books of original record (journal, cash book, etc.) have been recorded and posted correctly.
However, equal totals do suggest that several types of errors probably have not occurred.
| Author | NCERT |
| Language | English |
| No. of Pages | 46 |
| PDF Size | 3.2 MB |
| Category | Accountancy |
| Source/Credits | ncert.nic.in |
NCERT Solutions Class 11 Accountancy Chapter 6 Trial Balance and Rectification of Errors
1. State the meaning of a Trial Balance.
Trial Balance is a list of all general ledgers accounts present in the ledger of a business, the main purpose of its creation is to verify the arithmetical accuracy of the accounts. It is carefully prepared after balancing of all the accounts of ledger. Trial Balance consists of two columns, debit side consists of all the debit balances and credit side contains all the credit balances of the accounts.
2. Give two examples of errors of commission.
Errors that are committed when transactions are recorded with wrong amounts, improper balancing, wrong posting or wrong carrying forwarding are called errors of commission. Here are two examples of such errors.
- Goods purchased worth Rs 1,000 on credit are recorded in the Purchases Book as Rs 10,000.
This transaction should have been recorded in the Purchases Book with an amount of Rs 1,000; however, it was recorded as Rs 10,000. This is an error due to wrong recording of amount.
- Total of Sales Book is carried forward as Rs 1,000 instead of Rs 100.
In this case, wrong amount is carried forward from one accounting period to another or from an end of one page to the beginning of another page. This is referred to as an error of carrying forward.
3. Give two examples of errors of principle.
Errors that are committed when recording of transactions is done against the accounting principle are known as Errors of principle. Here are some examples of the same.
(i) Wages paid for construction of building debited to Wages Account
In this transaction, wages paid for the construction of building is a capital expenditure, so the building account should have been debited. However, it is treated as a revenue expenditure and Wages Account is debited. It is not in accordance with the accounting principle and hence is an error.
(ii) Amount spent on repair of machinery debited to Machinery Account
In this transaction, amount of repair on machinery is a revenue expenditure. It should have been debited as ‘Repairs’, but it is wrongly debited to the Machinery Account which is an error of principle.
NCERT Class 11 Accountancy Textbook Chapter 6 With Answer PDF Free Download