Presentation on theme: "Debit and credit balances guidelines Debit balance Cash account Purchases account Returns in Fixed asset accounts Expenses accounts Drawing accounts Debtor’s."— Presentation transcript:
Debit and credit balances guidelines Debit balance Cash account Purchases account Returns in Fixed asset accounts Expenses accounts Drawing accounts Debtor’s account Carriage in & out Bank if money in bank Credit balances Sales account Returns out Income accounts Capital account Loan account Creditor accounts Bank if overdrawn
If the trial balance does not balance… … There is an error The addition of the trial balance And/or in the double entry bookkeeping To find errors use the following procedures
Check the addition in the trial balance Check the balance of each account has been correctly entered in the TB & under the correct heading Dr/Cr Check the balance of every account in the ledger has been included Check the calculation of the balance on each account Calculate the amount the TB is wrong, look for a transaction for this amount, if found check the double entry has been carried out correctly
½ the amount by which the TB is wrong, and look for a transaction for this amount, if found check the double entry If the amount the TB is wrong is / by 9, then the error maybe a reversal of figures If the TB is out by a round amount the error is likely to be in the calculation of the accounts If the error is still not found, check all bookkeeping transactions since the last TB, by going back through all the original documents & primary accounting records
Trial balance and errors Trial balance means that certain errors have not been made There are several types of errors that will not affect the balancing of a trial balance –Examples of errors which would be revealed are errors in addition, using one figure for debit entry and another for the credit, entering only one aspect of a transaction
Errors not shown are: Errors of omission Reversal entries Mispost/error of commission Error of principle Error of original entry Compensating error
Importance of Trial Balance Business will extract a TB on a regular basis to check arithmetical accuracy of the bookkeeping. It is used as the starting point in the production of the final accounts.