When a Trial Balance Balances, It Means the Accounts Are Free of Errors.
The question stated that when a Trial Balance balances, it means the accounts are free of errors. I disagree with the statement. There may still be errors even if the trial balance is balances.
There are six types of errors. The first type of error is the “error of omission” and the word omission mean left out. Its mean that a transaction is not recorded in the books of original entry, which mean both the debit and credit effects of the transaction are not shown in the Trial Balance. For example, a transaction “sell goods for cash” we should Debit cash and Credit sales. If this error is committed, this transaction will be omitted and remain unrecorded. This will not be shown in both the debit and credit side of the Trial Balance by the same amount, thus the Trial Balance will still be balances.
The second type of error is the “reversal of entry”. For example, a transaction “Purchase using cash”; it was entered in the account cash as debit and the account inventory as credit when it should have been entered as a credit in the account cash and as a debit in the account inventory. Since the amount for both account is the same, the Trial Balance will balance.
The third type of error is entering the transaction into the wrong type of account. For example, a transaction “purchase of equipment” is debited to an Expense account instead of Equipment account. Both Expense and Equipment account are under debit side in Trial Balance, so the error of putting the amount into expense account wrongly will not cause the Trial Balance to unbalance.
The forth type of error is the “error of commission”. It means that a transaction have been recorded in the wrong account but debited or credited correctly. For example, Instead of trade receivable - customer A, trade receivable - customer B is debited.
The fifth type of error is “compensating error”. It means that when an error had been made in the debit side, and in the mean time another error with the identical amount
There are six types of errors. The first type of error is the “error of omission” and the word omission mean left out. Its mean that a transaction is not recorded in the books of original entry, which mean both the debit and credit effects of the transaction are not shown in the Trial Balance. For example, a transaction “sell goods for cash” we should Debit cash and Credit sales. If this error is committed, this transaction will be omitted and remain unrecorded. This will not be shown in both the debit and credit side of the Trial Balance by the same amount, thus the Trial Balance will still be balances.
The second type of error is the “reversal of entry”. For example, a transaction “Purchase using cash”; it was entered in the account cash as debit and the account inventory as credit when it should have been entered as a credit in the account cash and as a debit in the account inventory. Since the amount for both account is the same, the Trial Balance will balance.
The third type of error is entering the transaction into the wrong type of account. For example, a transaction “purchase of equipment” is debited to an Expense account instead of Equipment account. Both Expense and Equipment account are under debit side in Trial Balance, so the error of putting the amount into expense account wrongly will not cause the Trial Balance to unbalance.
The forth type of error is the “error of commission”. It means that a transaction have been recorded in the wrong account but debited or credited correctly. For example, Instead of trade receivable - customer A, trade receivable - customer B is debited.
The fifth type of error is “compensating error”. It means that when an error had been made in the debit side, and in the mean time another error with the identical amount