What if trial balance doesnt balance

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Error of reversal. Error of principle. Error commission. Errors of subsidiary entry. Compensating errors. A trial balance is a conglomerate of or list of debit and credit balances extracted from various accounts in the ledger including cash and bank balances from cash book. The rule to prepare trial balance is that the total of the debit balances and credit balances extracted from the ledger must tally.

The trial balance has two sides, the debit side and the credit side. The debit side and the credit side must balance , meaning the value of the debits should equal the value of the credits.

A trial balance will not balance if both sides do not equal, and the reason has to be explored and corrected. What is the objective of trial balance? The purpose of a trial balance is to ensure that all entries made into an organization's general ledger are properly balanced.

A trial balance lists the ending balance in each general ledger account. For example, if you transposed numbers while posting from the general journal to the general ledger, or from the ledger to the trial balance sheet, this could cause the trial balance to not equal out. Also, if you made a math error, this can cause a problem too. Or perhaps you credited something that should have been debited or vice versa, or you applied a transaction to the wrong account.

If the amount is substantial, start with the larger transactions made during the month and make sure no numbers were transposed and that the transaction was applied to the proper ledger account. A trick for checking for a transposition error is divide by 9. If the difference between the two sides is divisible by 9. If that checks out, recalculate the ledgers with the most transactions, which for most businesses is cash and sales.

As a matter of technique it might be worth adding the columns from the bottom upwards to avoid the same mistake being made twice. Even if the trial balance is still out of balance the process will at least verify that the difference is consistent with previous results. The difference calculated above is the amount of the error in the unbalanced trial balance. A quick check through the accounts in the ledger should be made to determine whether a balance has simply been omitted from the trial balance.

In addition check through the trial balance to see whether the amount is included but missed from the column additions. Take the trial balance difference and divide it by 2. Check the unbalanced trial balance to see whether there is an account balance for this amount. The difference of is divided by 2 to provide the amount of By looking at the trial balance we can now identify that the wages expense account has a credit balance of It is normal for expenses to have a debit balance and therefore by checking the wages expense account we can determine whether this balance had been included on the wrong side of the unbalanced trial balance make the appropriate correction.

If the difference divided by 9 produces a whole number then it may indicate a transposition error where numbers have been entered in reverse e.