What Errors Are Disclosed by the Trial Balance?

Trial Balance

A trial balance is a list of all accounts and their balances at a given time. Accounts are listed in the order in which they appear in the general ledger, beginning with asset accounts, liability accounts, equity accounts, and finally revenue and expense accounts. To the right of the account list, debit balances are listed in the left column and credit balances in the right column. Absent certain journalizing and posting errors, the total of the account balances in the two columns should be in agreement.

A trial balance can uncover certain journalizing errors. Under the double-entry recording system, two kinds of journalizing errors may occur in general --- an entry amount error or an entry account error. In recording business transactions, when a wrong amount is entered into a correct account, there will be an imbalance between the debit and credit, causing an inequality of the trial balance later. When the right amount is entered into the wrong side of an account, a trial balance will also not produce a set of balanced amounts between debits and credits.

Posting is the transfer of journal data to relevant accounts in the general ledger. Free of any journalizing errors, a trial balance may still not be balanced because of certain posting errors. The same amount- and account-related errors can also occur in posting. Such errors can result in either a wrong amount transferred to a correct ledger account or a correct amount to a wrong ledger account, resulting in an incorrect balance for the accounts involved. An arithmetic error may also occur when totaling transaction amounts for each ledger account, which a trial balance is designed to discover.

A trial balance, however, is not capable of discovering all journalizing- and posting-related errors. Certain errors may not alter the equality of debits and credits in a trial balance. For example, the omission of a transaction in journalizing, or the failure to post a pair of journal entries to the ledger, has no effect on whether a trial balance is accurate. Additionally, offsetting errors can be made when equal debits and credits are in the wrong amount or to the wrong account, and such errors will also not affect the accuracy of a trial balance.