Types of Errors-All errors may be classified into the following two categories-
1. Errors affecting Trial Balance means one sided errors
2. Errors not affecting Trial Balance means double sided errors

1. Errors affecting Trial Balance means one sided errors-
If the Trial Balance does not tally, it will indicate that certain errors have been committed which have affected the agreement of the Trial Balance. The accountant will then proceed to find out the Errors and ultimately the errors will be located. Such errors are called Errors Disclosed by Trial Balance.
1. Wrong Casting- If the total of the Cash book or some other Subsidiary Book is wrong; the Trail Balance will not tally. For example, the total of the purchase Book has been added Rs. 1,000 in excess. When this total will be posted to the debit side of the purchase account, it will also show an excess debit of Rs 1,000 and Trial Balance will not tally.
2. Posting to the Wrong side- If instead of posting an amount on the debit side of an account, it is posted on the credit side or vice versa, the Trial Balance will not tally. For example, goods for Rs 2,000 have been purchased from Gopal. If instead of posting the amount on the credit side of Gopal account it is posted to his debit, the debit side of the Trial Balance will exceed the credit by Rs 4,000.
3. Posting of Wrong Amount- The Trial Balance will not tally if the posting in an account is made with an incorrect amount. For example, goods for Rs 600 have been purchased from Mahendra. If it has been correctly entered in the Purchase Book but while posting To Mahendra credit, the amount posted is Rs 60 instead of Rs 600, the Trial Balance will not tally
4. Omission of Posting of One Side of an Entry- For Example, if Rs 500 have been received from Ram and correctly entered in the Cash Book, but if it is omitted to be posted on the credit side of Rams account, the Trial Balance will not tally.
5. Double Posting in a Single Account- For example, if Rs 500 have been received from Shyam Lal and correctly entered in the Cash Book, but if it posted twice on the credit side of Shyam Lal account, the Trial Balance will not tally.
2. Errors not affecting Trial Balance means double sided errors-
Main objective of preparing a Trial Balance is to check the accuracy of the accounts. However, the equality of debit and credit of the Trial Balance does not mean that there are absolutely no errors in the books of accounts. There may be a number of errors which may remain undetected in spite of the agreement of a Trial Balance. As such it is true to say that Trial Balance is not a conclusive proof of the accuracy of the books of accounts. There are certain errors which do not affect the agreement of the Trial Balance. Such errors are called limitations of Trial Balance. These may be discussed as below—

1. Errors of Omission- If a transaction remains altogether unrecorded either in the journal or in subsidiary Books, it will be termed as an error of omission. Such an error will not affect the agreement of a trial balanceas neither the transaction has been entered on the debit side of an account nor on the credit side of any other account.For example suppose goods for rs 2,000 have been sold to Ram on credit and the transaction was omitted to be recorded in the books. The omission will not effect the trial balance.
2. Errors of Commission- If a Wrong amount is entered either in the Journal or in the Susidiary Books, the trial balance will tally because the same amount will be posted in both the account affected by the transaction. For example. sale of goods to Ram on credit for Rs 420 has been entered in the journal as Rs 240. When the entry is posted to Ledgr, Double Entry will be completed with Rs 240, Ram being debited with Rs 240, and sales account being credited with rs 240.
3. Compensating Errors- If the effect of one error is neutralised by the effect of some other error, such errors are called compensating errors. For example, while posting on the debit side of Anil account, Rs 50 are posted istead of Rs 500 and while posting on the debit side of Sunil account Rs 500 are posted instead of Rs 50. These two mistakes will not effect the trial balance.
4. Errors of Principle- When some fundamental principle of Accountancy is violated while recording a transaction the error is termed as error of principle. These errors are committed in those cases where a proper distinction between capital and revenue items is not made.



Financial Statements