Debit and credit balances guidelines

• Debit balanceCash account

Purchases accountReturns in

Fixed asset accountsExpenses accountsDrawing accountsDebtor’s accountCarriage in & out

Bank if money in bank

• Credit balancesSales accountReturns out

Income accountsCapital accountLoan account

Creditor accountsBank if overdrawn

If the trial balance does not balance…

…There is an error• The addition of the trial balance• And/or in the double entry bookkeeping

• To find errors use the following procedures

• Check the addition in the trial balance• Check the balance of each account has

been correctly entered in the TB & under the correct heading Dr/Cr

• Check the balance of every account in the ledger has been included

• Check the calculation of the balance on each account

• Calculate the amount the TB is wrong, look for a transaction for this amount, if found check the double entry has been carried out correctly

• ½ the amount by which the TB is wrong, and look for a transaction for this amount, if found check the double entry

• If the amount the TB is wrong is / by 9, then the error maybe a reversal of figures

• If the TB is out by a round amount the error is likely to be in the calculation of the accounts

• If the error is still not found, check all bookkeeping transactions since the last TB, by going back through all the original documents & primary accounting records

Trial balance and errors

• Trial balance means that certain errors have not been made

• There are several types of errors that will not affect the balancing of a trial balance– Examples of errors which would be

revealed are errors in addition, using one figure for debit entry and another for the credit, entering only one aspect of a transaction

Errors not shown are:

• Errors of omission• Reversal entries• Mispost/error of commission• Error of principle• Error of original entry• Compensating error

Importance of Trial Balance

• Business will extract a TB on a regular basis to check arithmetical accuracy of the bookkeeping.

• It is used as the starting point in the production of the final accounts.