A difference between the two columns is a clue, not just a problem. Four quick tests on the amount tell you what kind of error to look for before you open a ledger.
This lesson follows preparing a trial balance, and is part of the trial balance guide.
What are the four tests?
- Recheck the addition of both columns, slowly.
- Half the difference. Look for a balance of that size on the wrong side.
- Divide the difference by 9. If it divides exactly, look for two digits swapped.
- Match the difference to one entry. Look for a transaction of that amount entered on one side only.
Worked example: a difference of RM90
The debit column totals RM41 560 and the credit column totals RM41 650. The credit side is larger by RM90. All amounts are in RM.
- The addition rechecks correctly, so the difference is real.
- Half of 90 is 45. No balance of 45 appears in the list, so a wrong-side balance is unlikely.
- 90 ÷ 9 = 10, so a transposition is likely. A figure such as 450 written as 540 differs by exactly 90.
- No transaction of exactly RM90 is missing from the books.
Scan the credit column for a figure that may have been reversed. The creditors balance is shown as 540, but the ledger account adds up to 450. That credit is overstated by 90 and explains the whole difference.
The mistake that costs marks
A common slip is to start by re-posting every transaction. It takes a long time, and even a correct re-posting does not show where the original went wrong.
| Approach | Time | What it finds |
|---|---|---|
| Search from the top of the ledger | Long | The error, eventually, or none |
| Four tests on the difference | A minute or two | The kind of error, then the account |
Using the difference first narrows the search to a few accounts.
Check yourself
The debit column totals RM27 300 and the credit column totals RM26 700. After rechecking the addition, name two possible causes of the RM600 difference.
Answer
The debit side is larger by 600. Half of 600 is 300, so a credit balance of RM300 entered in the debit column would create exactly this gap (the debit total rises by 300 and the credit total falls by 300).
The difference of 600 is not divisible by 9 (600 ÷ 9 is not a whole number), so a transposition is unlikely. A second possibility is a credit entry of RM600 that was left out of the ledger.
What to study next
Some errors leave the columns equal and cannot be found by these tests. Read errors that do not disturb agreement, then work through the trial balance practice set.
Keep a mistake log of the errors you make so you can see your pattern. A teacher can coach the order of checks in online one-to-one Accounting tuition.