CHAPTER 7
STUDY NOTES
, Trial Balance and Correction of
Errors
The role of the trial balance in the accounting cycle:
The trial balance tests the application of the double entry principle. A trial balance can be drafted or
prepared whenever there were changes to the general ledger through additional transactions or
correction of mistakes in the general ledger.
The purpose of Trial Balance: validation of the application of the double entry principle.
The following table contains the common trial balances used throughout the accounting cycle:
Type of Trial Balance Purpose Frequency
Test the double entry principle As often as needed, usually
after transactions were posted once a month
Pre- adjustment trial balance
form the journals to the general
ledger.
Tests the double entry principle Normally prepared at year end.
after adjustments were made. These amounts are used to
Post adjustment trial balance
prepare the financial
statements.
Test the double entry principle Normally prepared at year end
Post-closing trial balance after the accounts have been in preparation for the new
closed off. financial year.
Correction of Errors in the Trial Balance
Strategies to identify and rectify the error:
a) Ensure totals from various ledger accounts were transferred to the correct side in the trial
balance in accordance to their classifications and normal balance in the accounting
equation.
b) Ensure that the correct amount was transferred, also make sure the balances and totals in
the GL were calculated correctly.
c) Number of accounts in GL = Number of items transferred to the trial balance.
d) Go through Adjustments again in order to confirm the correct accounting treatment of any
adjustments.
e) Subsidiary Ledgers will not have an affect on the trial balance.
Limitations of the Trial Balance
The following errors will not be evident in the trial balance:
a) Omission of the transactions; if a transaction was omitted in totally, it will not be discovered by
preparing trial balance.
STUDY NOTES
, Trial Balance and Correction of
Errors
The role of the trial balance in the accounting cycle:
The trial balance tests the application of the double entry principle. A trial balance can be drafted or
prepared whenever there were changes to the general ledger through additional transactions or
correction of mistakes in the general ledger.
The purpose of Trial Balance: validation of the application of the double entry principle.
The following table contains the common trial balances used throughout the accounting cycle:
Type of Trial Balance Purpose Frequency
Test the double entry principle As often as needed, usually
after transactions were posted once a month
Pre- adjustment trial balance
form the journals to the general
ledger.
Tests the double entry principle Normally prepared at year end.
after adjustments were made. These amounts are used to
Post adjustment trial balance
prepare the financial
statements.
Test the double entry principle Normally prepared at year end
Post-closing trial balance after the accounts have been in preparation for the new
closed off. financial year.
Correction of Errors in the Trial Balance
Strategies to identify and rectify the error:
a) Ensure totals from various ledger accounts were transferred to the correct side in the trial
balance in accordance to their classifications and normal balance in the accounting
equation.
b) Ensure that the correct amount was transferred, also make sure the balances and totals in
the GL were calculated correctly.
c) Number of accounts in GL = Number of items transferred to the trial balance.
d) Go through Adjustments again in order to confirm the correct accounting treatment of any
adjustments.
e) Subsidiary Ledgers will not have an affect on the trial balance.
Limitations of the Trial Balance
The following errors will not be evident in the trial balance:
a) Omission of the transactions; if a transaction was omitted in totally, it will not be discovered by
preparing trial balance.
