A trial balance is prepared to check the arithmetic accuracy of accounts. It lists all ledger account balances on a specific date. The total of the debit column must match the total of the credit column. If the totals do not agree, it means one or more errors have occurred while recording or posting. After finding the errors, they must be rectified, and then a revised trial balance is prepared.

Steps to Prepare Trial Balance

Step 1
Complete all ledger postings from the journal.
Step 2
Find the balance of each account.
Step 3
List all debit balances in the debit column.
Step 4
List all credit balances in the credit column.
Step 5
Total both columns to check if they agree.

Common Errors Found Before Trial Balance

Error of omission
Error of commission
Error of principle
Compensating errors
Posting mistakes
Wrong balancing
Wrong carry forward

Some errors affect the trial balance and some do not.

Rectification of Errors before Trial Balance:

These errors are corrected with simple journal entries.

Example

Sales of 2000 not posted to Sales Account.

Correct Entry
Sales A c Dr. 2000
To Suspense A c 2000

After correcting all errors, a fresh trial balance is prepared.

Rectification of Errors after Trial Balance:

When the trial balance does not agree, a Suspense Account is opened.
Errors are corrected by passing journal entries and using Suspense Account only for the balancing portion.

Example
Wages of 500 posted to Salaries Account.

Correct Entry
Suspense A c Dr. 500
To Wages A c 500

Example of Trial Balance with Rectification

(Before Rectification)

Error Found

Sales of 5,000 wrongly posted as 500.

Correct Entry
Sales A c Dr. 4,500
To Suspense A c 4,500

Revised Trial Balance

After final corrections, Suspense Account becomes zero in a correct system and the last balanced trial balance will match exactly.