Locating Errors

Disagreement of the trial balance is the indication for the existence of accounting errors in the book of accounts. In the absence of the agreement of the trial balance, final accounts cannot be prepared. Hence, the errors should be located and rectified as early as possible.

Step for locating errors

While examining the book of accounts for locating the errors, it would be better to follow some steps one after another serially to make the re-examination work easier and quicker. For this reason, the following steps should be followed for locating the errors: -

1. Check the total of the trial balance if it is written correctly or not.
2. Check whether the balances of the ledger accounts have been extracted in the trial balance correctly or not.
3. Check whether the balances of assets, liabilities and capital have been brought down in the new books correctly or not.
4. Check whether the balances of the ledger accounts have been obtained correctly or not.
5. Verify the total of the subsidiary books.
6. Compare the items of the trial balance of the current year with that of the previous year.
7. Verify the posting and journalizing.

Adjustment and closing

Adjustment and closing of the trial balance is an artificial process of closing. It is the process of determining the difference amount of the trial balance and making it equal by inserting the suspense account. Thus, the adjustment helps to close the trial balance and gives the way for preparing the final accounts.

Suspense account

The suspense account is the temporary means for making the trial balance equal. It helps to adjust the difference amount and close the trial balance. It gives the way for preparing the final accounts in time.
The suspense account has newly opened an account with the difference amount of the trial balance. If the debit total of the trial balance is heavier than its credit total, the amount of suspense account is inserted under credit column. Similarly, if the credit total of the trial balance is heavier than its debit total, the amount of suspense account is inserted under its debit column. When the errors are located and rectified completely, the suspense account disappears from the books of the accounts.