# NCERT Notes for Class 11 Accountancy Chapter 6 TRIAL BALANCE AND RECTIFICATION OF ERRORS

## Class 11 Accountancy Chapter 6 TRIAL BALANCE AND RECTIFICATION OF ERRORS

NCERT Notes for Class 11 Accountancy Chapter 6 TRIAL BALANCE AND RECTIFICATION OF ERRORS, (Accountancy) exam are Students are taught thru NCERT books in some of state board and CBSE Schools.  As the chapter involves an end, there is an exercise provided to assist students prepare for evaluation.  Students need to clear up those exercises very well because the questions withinside the very last asked from those.

Sometimes, students get stuck withinside the exercises and are not able to clear up all of the questions.  To assist students, solve all of the questions and maintain their studies without a doubt, we have provided step by step NCERT Notes for the students for all classes.  These answers will similarly help students in scoring better marks with the assist of properly illustrated Notes as a way to similarly assist the students and answering the questions right.

## TRIAL BALANCE AND RECTIFICATION OF ERRORS

A trial balance can be defined as a statement of balances or total of debits and credits of all the accounts in the ledger on a particular date prepared to test the arithmetical accuracy of the books kept under double entry system.

### Characteristics

1. Trial balance is not a part of double entry
2. It is not an account
3. It is prepared on a particular date
4. Total of the debit and credit column must be equal

### Objectives

1. To ascertain the arithmetical accuracy of ledger accounts
2. To find out mistakes and rectify them
3. To provide a basis for financial statements

Trial balance may be prepared under three methods

1. Total method
2. Balance method
3. Total cum balance method

### Total method

Under this method the totals of debit sides of all accounts are placed in the debit column of the statement and the total of ll accounts are placed in the credit column.

### Balance method

Under this method the balance of ledger accounts are shown in the trial balance. The account having debit balances are entered in the debit column of the trial balance similarly accounts showing credit balance are entered in the credit column.

### Total cum balance method

This method is a combination of total method and balance method. Under this method four columns for amount are prepared. Two columns for writing the debit and credit totals of various accounts and two columns for writing the debit and credit balances of these accounts.

## Preparation of trial balance

While preparing a trial balance the various ledger balances may be grouped as:

### 1.Assets and liabilities

All assets account will be a debit balance and all liabilities will have a credit balance. Capital is the liability of the business to the owner. Hence capital account will have a credit balance.

### 2. Expenses or losses and incomes or gains

Accounts representing expenses or losses will have a debit balance. But accounts representing income or gains will show a credit balance.

Opening stock, purchase and sales return will show a debit balance and sales and purchase return will show a credit balance.

### 4. Special items

Reserves and provisions accounts will generally show credit balance and drawings will show a debit balance.

## Format of Trial Balance

Trial Balance of …………….as on ………………..

 Account Title L.F Debit Balance Credit Balance Total

## Errors and its classification

A trial balance is prepared to check the arithmetical accuracy of accounts. If the trial balance does not tally it means that there are certain arithmetical errors in it, even if the trial balance tallies there may still some errors.

## Types of errors

On the basis of their nature errors are two types

1. Clerical errors
2. Error of principle

### Error of principle

An error of principle will arise when a transaction is recorded in contravention to accounting principle.

### Clerical errors

The errors arise because of mistakes committed in the ordinary course of accounting work are called clerical errors. Clerical errors are again classified in to

## 1– Error of omission

When a transaction is omitted to record in the books of original entry or omitted to be posted from the books of original entry to the ledger is an error of omission. These can be of two types

i. Complete omission

When a transaction is completely omitted from recording in the books of accounts is an error of complete omission

ii. Partial omission

When a transaction is partially omitted to be recorded in the books is known as error of partial omission.

## 2- Errors of commission

These errors are arising as a result of the mistakes committed by the accounting staff at the time of recording, posting or balancing.

### 3- Compensating errors.

If the effect of an error in one account is cancelled by the effect of one or more errors in some other accounts is called compensating error.

## Detection and rectification of errors

If the trial balance does not tally it implies that there are errors in the accounting procedure. Such errors have to be located by examining the accounting procedure backward and corrected before preparing the final accounts.

Errors should not be corrected by overwriting. If it is ascertained that an error has been committed immediately after making that entry, it should be corrected by making fresh entry after neatly crossing the wrong entry. But if the errors are detected at the time of preparation of final accounts it should be corrected by making a rectification entry. The entries passed through the journal proper for rectifying the errors in the books of accounts are known as rectifying entries.

If all the attempts fail to locate the errors, the preparation of final account cannot be further delayed. The difference in the trial balance temporarily transferred to an account called suspense account.

## Suspense account

The suspense account is a temporary account in which the difference in a trial balance is place d and is wiped off when the errors are located and corrected. The suspense account balance will be placed on that side of the trial balance which is found tom be shorted.

From the point of view of rectification errors are classified in to

1. Errors disclosed by trial balance / errors which affect the trial balance
2. Errors not disclosed by trial balance. / errors which do not affect the trial balance Errors which affect the trial balance

It is also called one sided errors because this error is committed only on one aspect of a transaction. One sided error does not require any journal entry for rectification. It can be rectified by an explanatory note in the account or by physical correction of wrong figure or an opposite entry in the same account with the help of suspense account.

1. Wrong casting and wrong carry forward
2. Wrong balancing of an account
3. Posting of an amount on the wrong side of an account
4. Posting wrong amount on the correct side of an account
5. Omission to post an amount to ledger
6. Omission of an account balance in the trial balance
7. Writing the balance of an account on the wrong side of the trial balance
8. Posting the same amount twice in an account
9. Omission to post the total of the subsidiary books to the ledger.

### Errors which do not affect the trial balance

It is also called two sided error because the error may affect both the accounts. For the correction of two sided errors a complete rectification entry is required.

1. Complete omission of a transaction
2. Writing an entry in the wrong subsidiary book
3. Posting to wrong heads of accounts but on the correct side.
4. Error of principle
5. Compensating error
6. Writing wrong amount in the subsidiary book.

### Rectification of errors in the next accounting year

• The Rectification of errors in the next accounting year depends upon the fact whether the account affected was part of the trading and profit and loss account.
• if the account affected is not part of the trading and profit and loss account the rectification is done in usual manner.
• However the account affected is part of the trading and profit and loss account, a profit and loss adjustment account is opened and all nominal accounts are replaced by profit and loss adjustment account to avoid the impact on the income statement of the next accounting year.