To trace a double entry error, ask what each side of the entry should have been and what was actually posted. The size of the trial balance difference tells you which kind of mistake to look for.
This lesson belongs to double entry and ledgers and prepares you for correction of errors.
How do you trace an error?
- Work out the difference between total debits and total credits, and which side is larger.
- Halve the difference. If a transaction of exactly that amount exists, a wrong-side posting is likely.
- If the difference equals one transaction, check for a one-sided posting.
- If the trial balance agrees, look for a wrong account or a missing entry, which the totals cannot reveal.
Worked example: a rent payment posted to the wrong side
Ravi pays RM600 rent by cheque. The correct entry is debit Rent 600, credit Bank 600. By mistake, he posts debit Rent 600 and debit Bank 600.
| Account | Should be | Was posted | Effect |
|---|---|---|---|
| Rent | Debit 600 | Debit 600 | Correct |
| Bank | Credit 600 | Debit 600 | Wrong side |
Debits are 600 too high and credits are 600 too low, so the trial balance shows debits larger by 1 200. To balance it for now, Ravi opens a Suspense account with a credit of RM1 200.
The error is found later. To correct it, debit Suspense RM1 200 and credit Bank RM1 200. The Bank account now reflects the payment, and Suspense is cleared to nil.
An error the trial balance cannot see
Suppose Ravi instead posts the same RM600 as debit Rent 600 and credit Suria Trading 600. The entry balances, so the trial balance agrees, yet Suria Trading looks like it is owed RM600 more and Bank is overstated.
| Step | Wrong | Right |
|---|---|---|
| Account credited | Suria Trading | Bank |
| Trial balance | Agrees | Agrees |
| Correction | None spotted | Debit Suria Trading 600, credit Bank 600 |
This is why an agreeing trial balance is not proof that the accounts are right.
The mistake that costs marks
It is tempting to push the whole difference into the account where it seems to fit, such as adding RM1 200 to Bank. That plugs the gap without fixing the real entry. Find the transaction first, then correct only the wrong posting.
Check yourself
Ravi buys goods worth RM700 on credit from Suria Trading. He debits Purchases RM700 but forgets to credit Suria Trading. What is the trial balance difference, and what is the correction?
Answer
Debits are RM700 higher than credits, because the credit side was never posted.
Before the error is found, a Suspense account would be credited with RM700 to make the trial balance agree.
Correction: credit Suria Trading RM700 and debit Suspense RM700. Suria Trading now shows the amount owed, and Suspense is cleared to nil.
What to study next
For the full set of error types, go to correction of errors. Then test yourself on the double entry practice set and log any patterns in the mistake log.
If you want a teacher to trace your own errors with you, see online one-to-one Accounting tuition.