Trial Balance

The trial balance is periodically used to check the mathematical integrity of the ledger ensuring the double entry rule has taken place. This is not done after every transaction; realistically it is performed on a basis established by the bookkeeper dependant upon the business size and financial transaction complexity. The factor one must remember is that the longer you leave it the harder to find an error if present. With programs such as MYOB or Quicken, this can be performed in a few clicks.

Preparation for trial balance consists:

1. Heading for the trial balance,
2. Find the balance of all ledger accounts,
3. List each ledger account name with its debit or credit balance in the appropriate column, and
4. Total both columns which must be equal.

View PDF version of trial balance

Trial Balance Errors

Whilst the trial balance is a good method to check arithmetic accuracy and the double entry rule, there are errors which the balance will not disclose to you, including:

• Entries made to the wrong side of each account,
• Transactions omitted or entered twice,
• Incorrect amounts entered on both sides,
• Entries made in the wrong accounts, though correct sides (allocation error), and
• Compensating errors that cancel one another out.

To locate trial balance errors, the following is a guide:

1. Re-add columns to confirm error,
2. Check each ledger account has its correct balance individually,
3. Ensure each ledger account balance is correctly listed upon the trial balance,
4. Subtract the total debit from the total credit and ensure; (1) the difference indicates an omitted posting; (2) half the difference indicates a posting to the wrong side; (3) a difference divisible by 9 indicates a transposed figure (eg. 649 instead of 946),
5. Check the balance in each ledger account by re-adding debit and credit columns and checking the subtraction to determine the account balance, and
6. Check all the postings back to the journal and source documents.