How to Correct a Trial Balance

An accurate trial balance is essential before beginning the next accounting step.

As part of the accounting cycle, you must create various trial balances. After initially posting all transactions for the period to the general ledger, you need to prepare an unadjusted trial balance. You must create an adjusted trial balance after posting adjusting journal entries. Finally, after preparing financial statements and entering closing journal entries, you should prepare a post-closing trial balance. Each of these trial balances must contain matching debits and credits; otherwise, it is out of balance and must be corrected. If this happens, there are certain steps you can take to correct your trial balance.

Things You'll Need

• Calculator (optional)

Instructions

1. Determine the difference between the total debits and total credits. First, add the total debits and total credits together. If they do not match, add them again to be sure that you did not simply total them incorrectly. Deduct the smaller total from the larger total to find the difference, which is the amount your trial balance needs to be adjusted by to balance.

2. Add the totals — debits and credits separately — of each account in your general ledger. By totaling debits and credits directly from the general ledger, you can see whether the error originates in the general ledger or if it is an error only in recording amounts to the trial balance. If the general ledger debits and credits do not balance, you must review the general ledger for errors and fix those errors in both the general ledger and trial balance.

3. Look at the general ledger to see whether any account balance equals the error amount in your trial balance. If so, you probably forgot to transfer that account balance to your trial balance. Or possibly you transferred the amount twice. Fix that error and verify that your trial balance now balances.

4. Divide your error amount by two and look for that amount in the general ledger. If you find an amount that matches, you most likely recorded it to the wrong column in your trial balance — a debit recorded as a credit or a credit recorded as a debit. Correct that error and verify that your debits and credits are now equal.

5. Determine whether the error amount in the trial balance is divisible by nine, indicating you may have a transposition or slide error. A transposition error means that you reversed two numbers; for example, you entered 56 instead of 65. A slide error means you have a place value error; for example, you entered 25 instead of 250. Look for any amounts you recorded incorrectly on the trial balance and correct them; then verify that your trial balance is correct.

6. Check each number in your trial balance against the corresponding number in your general ledger. If you have already verified that your general ledger balances, you know the error has to be something in the trial balance that does not match the general ledger. Correct any incorrectly transferred amounts, and confirm that your trial balance now balances.

References

• Austin Community College: Steps to the Accounting Cycle
• The University of Texas at El Paso: Review of the Accounting Process — The Basic Model
• Old Dominion University: Hints for Locating Accounting Errors
• University of Idaho: Introductory Accounting — Trial Balance
• Seattle Central Community College: Completion of the Accounting Cycle