Question

Which of the following errors would not be disclosed by preparation of a trial balance?

Answer 1

1. Errors of Principle:

An error of principle is an error which violates the fundamentals of book-keeping. For instance, purchase of furniture is debited to Purchase Account, instead of Furniture Account; Wages paid for the erection of plant is debited to Wages Account, instead of Plant Account; the amount spent on extension of building is debited to Repairs Account instead of Building Account etc. These types of errors do not affect the total debits and total credits but affect the principle of book-keeping.

2. Errors of Omission:

If a transaction is completely omitted, there will be no effect on the Trial Balance. When a transaction goes completely unrecorded in both aspects or a transaction after being recorded in the books of primary entry is not at all posted in the ledger, the error is an error of omission. For instance, if a credit purchase is omitted to be recorded in the Purchase Day Book, then it will be omitted to be posted both in the Purchase Account and the Supplier’s Account. This error will not, however, result in the disagreement of Trial Balance.

3. Posting to Wrong Account:

Posting an item to wrong account, but on the correct side. For instance, if a purchase of $ 200 from Ramu has been credited to Raman, instead of Ramu and this error will not affect the agreement of Trial Balance. Thus, Trial Balance will not detect such an error.

4. Error of Amounts in Original Book:

If an invoice for $ 632 is entered in Sales Book as $ 623, the Trial Balance will come out correctly, since the debit and credit have been recorded as $ 623. The arithmetical accuracy is there, but in fact there is an error.

5. Compensating Errors:

If one account in the ledger is debited with $ 500 less and another account in the ledger is credited $ 500 less, these errors cancel themselves. That is, one error is neutralized by similar error on the opposite side.