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Principles of Accounting · Trial balance

Errors a trial balance cannot reveal

Your trial balance agrees, yet the answer still loses marks for a wrong account.

A trial balance tests only that debits equal credits. Six kinds of error keep the totals equal, so they stay hidden until someone checks the accounts themselves.

This lesson is part of the trial balance guide. It follows finding errors that disturb agreement, which covers the errors that do show up.

What are the six errors?

Error What happens Worked example
Omission A transaction is left out completely A credit sale of RM300 is never recorded
Commission Posted to the wrong account of the same type RM80 electricity bill posted to the water expense
Principle Posted to the wrong type of account RM2 500 computer debited to Purchases
Original entry The wrong amount is used on both sides Invoice for RM1 200 recorded as RM1 020
Compensating Two errors cancel each other out Sales and purchases both overadded by RM100
Reversal The debit and credit sides are swapped Cash received from a debtor is debited to Debtors and credited to Bank

Worked example: a reversed entry

Ong Stationery paid a creditor RM500 by cheque. The bookkeeper recorded it as Debit Bank 500, Credit Creditors 500. The trial balance still agrees.

  1. The correct entry should be Debit Creditors 500, Credit Bank 500.
  2. The wrong entry increased the bank balance by 500 and the creditor balance by 500, instead of reducing both.
  3. To undo the wrong entry and post the right one, the correcting entry uses double the amount: Debit Creditors 1 000, Credit Bank 1 000.

Check the creditor account. It was wrongly credited 500 and should have been debited 500, so it is out by 1 000 in total. Debiting 1 000 sets it right.

The mistake that costs marks

A common slip is to correct a reversal with an entry for the original amount only. Debit and credit are equal, so the answer looks tidy.

Correction Creditors effect Correct?
Debit Creditors 500, Credit Bank 500 Cancels the wrong credit only No, the payment is still unrecorded
Debit Creditors 1 000, Credit Bank 1 000 Cancels it and records the payment Yes

Halving the correction leaves the books half wrong, which loses marks.

Check yourself

RM600 rent was paid by cheque, but the bookkeeper debited Insurance and credited Bank. Name the error and write the correcting entry.

Answer

Both rent and insurance are expenses, so this is an error of commission.

Correcting entry: Debit Rent 600, Credit Insurance 600. The Bank account is correct, so it is not touched.

What to study next

When the trial balance does not agree and you cannot find the error yet, using a suspense account holds the difference temporarily. Then use the trial balance practice set.

The debit-credit transaction trainer is useful for writing correcting entries. A teacher can go through them with you in online one-to-one Accounting tuition.

Common questions

If the trial balance agrees, is the ledger correct?

Not necessarily. Six kinds of error leave the debit and credit totals equal. Agreement shows that debits and credits are balanced, but an entry can still sit in the wrong account, be the wrong amount on both sides, or be missing entirely.

What is the difference between an error of commission and an error of principle?

In commission, the entry goes to the wrong account of the same type, such as electricity posted to water. In principle, it goes to the wrong type of account, such as a computer recorded as an expense instead of an asset.

How do I correct a reversed entry?

The wrong entry put each amount on the opposite side, so you must cancel it and post the right one. The correcting entry is therefore for double the original amount, debiting the account that should have been debited and crediting the other.

What is a compensating error?

Two or more separate errors cancel out. For example, sales are overadded by RM100 and purchases are overadded by RM100, so the totals still agree. Finding it needs a check of individual accounts, not of the trial balance.

If you can name the error types but hesitate on the correcting entry, a one-to-one Accounting lesson lets a teacher ask you to justify each side as you write it.

  • Online one-to-one lessons for your child with an experienced teacher.
  • Your first class is a one-hour trial, from RM50. The fee is agreed before you book.
  • Happy with the teacher? Continue with lessons of about 1.5 hours. If not, ask for another teacher.