Reason for trial balance not balancing

Correction of errors in accounting by erasing contradicts the accounting principles. Errors are to be corrected by passing appropriate journal entry or bringing correction in the ledger account concerned complying with the accounting principle.

A man commits mistake it is natural, mistakes may occur in keeping accounts. An accountant may amount mistake in keeping accounts of transactions inadvertently or due to a lack of proper knowledge.

The trial balance is the only way to detect errors of accounts if any. But errors may remain in accounts even after the agreement of the trial balance. Rectification of errors of accounts if any is indispensable. The errors mentioned below do not hamper the agreement of a trial balance. Despite the following errors in accounts, the totals of the debit money column and credit money column agree. The omission of recording a particular transaction does not hamper the agreement of the trial balance.

If this transaction is not recorded in the books of account the agreement of a trial balance remains unaffected. The amount written in the journal for a particular transaction may be greater or smaller in the ledger accounts and the debtor is treated as creditor and creditor as a debtor, such types of mistakes are called errors of commission. 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. Suppose for example a balance of had been entered on the trial balance as with the numbers 5 and 9 transposed. By dividing the trial balance error in this case 36 by 9 we arrive at a whole number. This indicates a transposition error, the unbalanced trial balance should now be checked against account balances in the ledger to see whether the error can be identified.

Note: When applying this technique that if the digits of a number add up to 9 then the number itself is divisible by 9. For example if the difference was 2, we can calculate the following. Since the digits of the number add up to 9 then 2, must be divisible by 9 i.

This can be done using an augmented binary search. To elaborate:. For records spanning 5 years, if you wanted to find the precise date of an imbalance issue using the above method would take no more than 11 runs of the Trial Balance. Line Items do not create a Transaction and therefore the assigned amounts remain in a calculative limbo. Please note that disabling this feature does not reverse any Nominal Codes that have been assigned outside of their areas, and will only work on prohibiting this action thereon.

Where The most efficient way of discovering what Line Items may be raised with Bank Account Nominal Codes is through some quick and simple manipulation of the Audit Trail. This occurs as a Transfer is a special type of Transaction that Credits or Debits a Bank Account Nominal Code directly, with a separate Transaction created to represent the monetary movement from the original Bank Account. When self-assigned, this causes an issue of the Transfers originating Transaction being omitted from the Nominal Ledger, and thus the calculation of the Trial Balance.

How This usually happens when a Bank Account is deleted without the Transactions within it first being removed or re-allocated. Where The most consistent method of discovering if this is the cause would be to look at the Nominal Ledger Report for each Bank Account, then search for any instances of it referencing itself. Please note, in most cases you may be able to use the Audit Trail much like in the guidance above for searching if a Bank Account has been assigned to a Line Item.

Fix To rectify this issue, you would need to navigate to the appropriate Transaction of the Bank Account and then simply change the associated Code to one other than the Bank Accounts own Nominal Code. An unbalanced trial balance definitely indicates a problem. However, just because a trial balance is equal on both sides, that does not mean there aren't errors. It is important that care and detail are used when completing these financial transactions since a business' bottom line depends on what the books say about it.

Francis has been a freelance and small business owner for 20 years. She has been writing about personal finance and budgeting since Francis Updated November 08, Related Articles.