SS1 Second Term Financial Accounting Lesson Note – Trial Balance and Correction of Errors

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WEEK 3        

TOPIC:          TRIAL BALANCE AND CORRECTION OF ERRORS

CONTENTS:

1. The need for Trial Balance
2. Preparation of Trial Balance
3. Correction of Errors
4. Suspense Account

SUB-TOPIC: The Need for Trial Balance

DEFINITION: A Trial Balance is a statement showing list of balances in a double entry form extracted from the ledgers to test the arithmetical accuracy of the accounts. The totals of the debit and credit must be in agreement.

Nature of Trial Balance:

1. It consists of all ledger balances extracted from the accounting books
2. It is drawn at a particular time.
3. The credit and debit column total must agree
4. It must be titled and dated
5. It must be sequentially arranged in the order of credit and debit items

Benefits of Double Entry:

The following are the benefits of Double Entry:

1. It provides complete record of business transactions.
2. It reduces the risk for fraud and facilitates the correction of errors.

• It provides basis for the test of arithmetical accuracy of the accounting records.

1. It is a means of providing financial information through the preparation of financial reports.
2. It enhances the reliability of accounting information that may be the product of accounting process.
3. Double entry aids the effective implementation and review of internal control system of an organization.

Types of Trial Balance:

In accounting practice, there are two major types of Trial Balance, namely:

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