Ledger Accounts, Trial Balance and the Correction of Errors
Ledger Accounts, Trial Balance and the Correction of Errors
This domain tests ledger construction, extraction of a trial balance and correction of errors. A trial balance proves arithmetic equality, not complete accuracy.
Ledger and trial balance rules
- Ledger accounts are classified as personal, real or nominal and are balanced at period end.
- Debit balances are listed in the debit column and credit balances in the credit column.
- Errors include omission, commission, principle, original entry, reversal, compensating and transposition errors.
- Some errors affect the trial balance; others do not because both sides are equally wrong.
- A suspense account holds a difference temporarily; corrections are made by journal.
Worked example
A payment of ₦300,000 for rent was debited to wages. The correction is Dr Rent ₦300,000 and Cr Wages ₦300,000. Both accounts are expenses, so the trial balance still balanced and no suspense account is needed. By contrast, if a credit sale of ₦540,000 was entered as ₦450,000 in both receivables and sales, the correction is Dr Receivables ₦90,000 and Cr Sales ₦90,000.
Traps that cost marks
- Believing a balanced trial balance proves there are no errors.
- Opening a suspense account for every error rather than only a trial balance difference.
- Rubbing out or overwriting entries instead of journalising corrections.
- Confusing error of principle with error of original entry.
- Forgetting that one-sided errors usually affect the trial balance.