Limitations of Trial Balance

A trail balance is a complete list of all the accounts of revenue and capitals that are listed in the general ledger. This list contains the headings or the name of general ledger accounts and the corresponding values of these accounts. There are two columns in a trial balance list the credit column and the debit column. The credits are listed in credit column and the debit entries are made in the debit account. There are a few limitations of trial balance account that are listed below-:

Limitations of Trial Balance

The basic purpose of trial balance is to check the sums of debits against the sum of credits. There are a few classes of errors that cannot be checked by the trial balance.

The Error of Original Entry

This error is the error that occurs when the original entry is made wrong at the first place. For example the price of a product is entered wrong. This error cannot be detected by trial balance.

The Error of Omission

This error occurs when an entry is not entered in the accounts. This means a transaction is not recorded at all. This error can also be not detected by the trial balance procedure,

The Error of Reversal

This error occurs when entries are correct but made to the wrong accounts such as debit accounts are entered to the credit and vice versa. This error can also be not detected by trial and balance

The error of Commission

This error occurs when entries are correct, the accounts are also correct but the entries are made under wrong account heads. For example marketing expense is added under fuel expense. Trial and balance cannot detect the error but the total will remain unaffected.

Other Related Accounting Articles:

• Preparing Trial Balance / Accuracy of Ledger