Agreement of Trial Balance Is Affected by

The trial balance is an essential tool used in accounting to ensure that the total debits and credits in a business`s accounts are equal. This tool is used to detect errors made in bookkeeping and accounting by listing all of the company`s accounts and their corresponding balances. However, there are certain factors that can affect the agreement of the trial balance. In this article, we will explore these factors.

1. Mis-posting and Omission

Mis-posting occurs when an entry is posted to the wrong account, while omission occurs when an entry is made but not posted or is posted to the wrong side of the account. Mis-posting and omission are common errors that can affect the agreement of the trial balance. Such errors result in an unequal total of debits and credits in the trial balance.

2. Errors of Principle

Errors of principle occur when a transaction is posted to the wrong type of account. For example, a purchase of a car might be debited to the office furniture account. This type of error results in an unequal total of debits and credits in the trial balance.

3. Compensating Errors

Compensating errors occur when two or more errors are made that compensate each other, resulting in an equal total of debits and credits in the trial balance. This type of error is difficult to detect and can lead to financial misstatements.

4. Error in Recording

An error in recording occurs when a transaction is recorded twice, leading to an unequal total of debits and credits in the trial balance. This type of error is common in manual accounting systems.

5. Error in Carrying Forward

An error in carrying forward occurs when an amount is carried forward from one period to the next. This can result in an unequal total of debits and credits in the trial balance. This type of error can result from simple mistakes in calculations or transferring numbers from one page to another.

In conclusion, it is important for businesses to be aware of the factors that can affect the agreement of trial balance. Errors in posting, omission, errors of principle, compensating errors, errors in recording, and errors in carrying forward can all disrupt the balance of a company`s accounts and lead to financial misstatements. Therefore, it is important to have a skilled accountant or bookkeeper who can accurately maintain financial records and detect and correct such errors.