A trial balance agrees when total debits equal total credits. It says nothing about whether the right accounts were used, or whether every transaction was recorded.
This lesson is part of finding the cause of a reconciliation difference. The full method for preparing the list is in the trial balance.
What is the test?
Ask whether the error changes the debit total and the credit total by different amounts. If it does, the trial balance will disagree. If both totals move by the same amount, or neither moves, the trial balance still agrees.
A trial balance that totals RM58 400 on each side can be carrying several errors of the second kind.
Worked example: six errors, one agreeing trial balance
Each row below is tested on its own against a trial balance of RM58 400 and RM58 400.
| Error | Explanation | Trial balance still agrees? |
|---|---|---|
| Error of omission: a RM750 credit sale was never recorded | Neither the debit nor the credit was posted | Yes |
| Error of commission: RM300 paid for repairs posted to the wrong expense account | The right side, the wrong account of the same type | Yes |
| Error of principle: a RM2 000 computer debited to office expenses | Wrong type of account, both sides equal | Yes |
| Error of original entry: RM480 of goods recorded as RM840 in both accounts | The wrong figure was used on both sides | Yes |
| Compensating errors: sales overstated by RM200 and rent expense overstated by RM200 | One error cancels the other | Yes |
| Reversal of entries: a RM500 receipt debited to the customer and credited to cash | Debit and credit swapped, both still RM500 | Yes |
Compare with one error that is revealed. If the RM480 was posted as RM480 on the debit side and RM84 on the credit side, the debit total exceeds the credit total by RM396, and the trial balance fails to agree.
Why explain it this way?
A reason earns more than a label. Saying “error of principle” earns less than saying “the computer is a non-current asset, but it was debited to an expense account, so debits still equal credits and the trial balance agrees, although profit is understated”.
The second answer names the account types, states the totals, and says what the error does to the final accounts.
The mistake that loses marks
The common slip is to write that the trial balance “proves the accounts are accurate”. It proves only that the arithmetic agrees.
A second slip is to list the error types from memory without linking each to the question. Use the figures in the question, so the answer cannot apply to any other paper.
Check yourself
Which of these errors would a trial balance reveal?
- (a) A credit purchase of RM640 was never recorded in either account.
- (b) Wages of RM1 200 were debited twice and credited once.
- (c) A RM90 payment was posted to the wrong customer account.
- (d) A sale of RM180 was debited to the customer as RM810 and credited to sales as RM180.
Answer
(a) Not revealed: error of omission, neither side was posted.
(b) Revealed: debits exceed credits by RM1 200, so the trial balance does not agree.
(c) Not revealed: error of commission, the amount is right but the account is wrong.
(d) Revealed: debit RM810 against credit RM180 leaves a difference of RM630.
What to study next
Learn how to repair these errors in correction of errors, then test the whole group with the practice set for this topic.
For a teacher to go through your own error explanations and tighten them, see online one-to-one Accounting tuition.