Two types of errors are not revealed by the Trial Balance. Which pair is correct?

Two types of errors are not revealed by the Trial Balance. Which pair is correct?

• A. Errors of original entry and Errors of principle
• B. Errors of complete omission and Recording error on only one side
• C. Errors of commission and Compensating errors
• D. Reversal of entries and Error of subtraction

Answer: (A)

The trial balance checks that total debits equal total credits, not whether each entry is classified or posted perfectly. Some misstatements keep the two sides in balance, so they aren’t revealed by the trial balance. The two types that do this are errors of principle and errors of original entry. An error of principle happens when you record a transaction in the wrong type of account, so the classification is incorrect even though the amount and the double entry still balance. For example, a purchase that should be capitalized as an asset is recorded as an expense. The debit and credit still total the same, but the asset and expense figures are misstated. An error of original entry occurs when the initial entry itself is wrong but posted in a way that keeps debits and credits equal. For instance, if a sale of 1,000 is recorded with the wrong amount on both sides (debit Debtors 1,000 and credit Sales 1,000 instead of the correct 1,000 on those accounts), the trial balance remains balanced even though the actual figures are incorrect. Other errors, such as recording on only one side or complete omission, tend to disturb the balance and would be detected (at least by noticing an imbalance or by cross-checks).

The trial balance checks that total debits equal total credits, not whether each entry is classified or posted perfectly. Some misstatements keep the two sides in balance, so they aren’t revealed by the trial balance. The two types that do this are errors of principle and errors of original entry.

An error of principle happens when you record a transaction in the wrong type of account, so the classification is incorrect even though the amount and the double entry still balance. For example, a purchase that should be capitalized as an asset is recorded as an expense. The debit and credit still total the same, but the asset and expense figures are misstated.

An error of original entry occurs when the initial entry itself is wrong but posted in a way that keeps debits and credits equal. For instance, if a sale of 1,000 is recorded with the wrong amount on both sides (debit Debtors 1,000 and credit Sales 1,000 instead of the correct 1,000 on those accounts), the trial balance remains balanced even though the actual figures are incorrect.

Other errors, such as recording on only one side or complete omission, tend to disturb the balance and would be detected (at least by noticing an imbalance or by cross-checks).