Ledger Accounts, the Trial Balance and Correction of Errors
From day book to ledger
The ledger holds the accounts. Post the totals of the day books, not each invoice, unless the question asks for individual accounts. Each account has a debit side and a credit side; balance it at the period end and bring the balance down on the opposite side.
The trial balance
A trial balance lists every ledger balance in debit and credit columns. If total debits equal total credits, the arithmetic is probably sound, but this does not prove there are no errors.
Errors the trial balance will not reveal
- Error of omission – a transaction left out entirely.
- Error of commission – posted to the wrong account of the same type.
- Error of principle – posted to the wrong class of account, e.g. vehicle repairs to the motor vehicle account.
- Reversal of entries – debit and credit swapped.
- Compensating errors – two mistakes that cancel out.
- Original entry – the same wrong figure used throughout.
Errors it will reveal
Single-entry of one side, addition mistakes, transposition (e.g. 540 written as 450), and posting one amount to the wrong side. Correct these with a journal entry, then post to the ledger.
Worked example
Rent of $900 was entered in the rent account as $90. The trial balance is out by $810. Correct with: debit Rent $810, credit Suspense $810. The suspense account absorbs the difference until all errors are found, and must end at nil.