Trial Balance and Rectification of Errors Test 26

Errors of commission are the errors that are committed due to wrong posting of transactions, wrong totaling or balancing of the accounts, wrong casting of the subsidiary books, or wrong recording of amount in the books of original entry, etc. For example, Raj Hans Traders paid Rs. 25,000 to Preetpal Traders (a supplier of goods). This transaction was correctly recorded in the cash book. But while posting to the ledger, Preetpal's account was debited with Rs. 2,500 only. This constitutes an error of commission. Such an error by definition is of clerical nature and most of the errors of commission affect in the trial balance.

The most important objective of trial balance is checking the accuracy of the accounts and detecting the errors. There are some errors that directly affect the trial balance i.e., the trial balance doesn't tallies while there are other errors when the trial balance may tally but it may not be accurate. 

• Recording wrong amount in subsidiary book and in account of customer or creditor will not affect the trial balance as the same amount has been debited and credited. The trial balance will tally but the amount will not be the same.
  

• Error of duplication means recording any transaction twice in the subsidiary books i.e., debited and credited twice. In this case the trial balance will tally  but the amount will be more.

• Error of complete omission refers to not recording the transaction in any account subsidiary book or journal i.e., the transaction does not appear in the trial balance.

The trial balance is prepared from the balances in the nominal/general ledger.

The figures that are entered in the nominal/general ledger are the totals from the books of prime entry.

So if the totals in the books of prime entry are wrong, then obviously the balances in the nominal/general ledger will be wrong as well, but it will not stop the trial balance balancing.

Where there can be a problem with the trial balance is where the debits and credits in the nominal/general ledger are different. This can happen either because of a simple mistake (e.g. debit with one figure and credit with another), or (more likely) when (for example) the cash book has been analysed and one of the column totals is wrong or has not been entered in the nominal/general ledger.

Error of commission is when wrong amount is entered in the journal or ledger leading to wrong totaling and wrong balance which is transferred to the trial balance and thus the trial balance does not tallies.

When purchase account is short by some amount, the trial balance shows a difference between the debit and the credit balances of the accounts.

Error of omission is when a transaction is not recorded at all in journal or in subsidiary books. This means there is no debit and credit effect of such transactions. The sales journal has not been taken into account this means that all the transactions related to sales are not recorded. In such cases the trial balance will tally but the balance will not be accurate.

The error of principle implies the violation of the fundamental principle of accounting. The distinction between capital and revenue items is not made.