Procedure for Detecting Errors in Trial Balance

Read this article to learn about the seven steps for detecting errors in trial balance.

Step 1:

Check the total of debit and credit columns of the trial balance. To arrive at the exact total, one should go through opposite directions viz., from top to bottom and bottom to top or vice-versa.

Step 2:

Re-check the correctness of balances of all ledger accounts.

Step 3:

Re-examine the correctness of the posting from books of original entries to ledger accounts.

Step 4:

Re-check the placing of balances of all ledger accounts, including cash book in the trial balance and examine whether all debit balances have been placed under the debit column and all credit balances under the credit column.

Step 5:

Re-check opening balances of all ledger accounts from the balance sheet of the previous year.

Step 6:

Compare each and every balance of trial balance of the current year with the trial balance of the previous year. In this process examine any addition or deletion of accounts. Also examine those large differences in amount which are neither expected nor explained.

Step 7:

If the error is not detected take the difference between the debit column balance and credit column balance. Now the question arises, which balance is correct viz., the column which is showing higher balance or the column which is showing lower balance.

In this regard, the following points may be examined:

(a) It may happen that the higher balance is correct. To verify this, it is necessary to check all credit items (if debit balance is higher) or all debits items (if credit balance is higher) with the amount of difference.

Example 1:

Due to omission of posting of an item of Rs. 2,500 on the credit side of the trial balance, the debit side of the trial balance will show an excess of Rs. 2,500.

(b) It may happen that the lower balance is correct. To verify this, divide the difference by 2. There is a chance that an amount equal to one-half of the difference is posted on the wrong side of the trial balance.

Example 2:

Due to posting of a credit balance of Rs. 900, in respect of bills payable, on the debit column of the trial balance, the debit column of the trial balance will show an excess of Rs. 1,800.

(c) It may happen that due to transposition of figures an error is caused. To verify this, divide the difference by 9. If it is exactly divisible by 9 the error may be due to transposition of figures.

Example 3:

Credit balance of Creditors Rs. 4,551 has been posted as Rs. 5,541 on the credit side of the trial balance. The credit column in the trial balance will exceed the debit column by Rs. 990 (i.e. Rs. 5.541 – Rs. 4,551). The difference of Rs. 990 is divisible by 9.

(d) It is possible that a slide error, due to incorrect placing of decimal point in any amount could have been committed. This error is also verified by dividing the difference by 9.

Example 4:

Rs. 5,460 has been written as Rs. 54.60. This error would lead to a difference of Rs. 5,405.40 which is divisible by 9.