Answer to Question #97580 in Accounting for Jane Lee

Question

2. Describe the purpose of a trial balance and identify three posting errors that would not be revealed by an 'out-of-balance' trial balance.

Answer 1

The purpose of the trial balance - to balance all the entries in the general ledger of the organization.

Trial Balance lists the closing balance in each account book. The total amount of debts and credits in each ledger must be the same. Thus, if the total of the debits and the total loan amount does not coincide on the trial balance, this indicates that one or more transactions have been recorded in the general ledger, which were unbalanced.

three posting errors that would not be revealed, for example:

1) Errors of Original entry (a wrong amount is recorded in a document such is invoice? And post to the ledger accounts)

2)     Compensating Errors (error on the debit side is compensated by an error of equal amount on the credit side)

3)     Errors of Complete Reversal ( the debit entry and the credit entry are reversed)

https://www.accountingtools.com/articles/what-is-the-purpose-of-a-trial-balance.html

https://www.slideshare.net/ezahanz/errors-not-revealed-by-a-trial-balance