Section 1 of 8
The trial balance is a list of all general ledger account balances at a given date, arranged in two columns — debit (DR) and credit (CR).
Assets + Expenses + Drawings = Liabilities + Income + Capital
This explains why the trial balance balances: every debit has a corresponding credit.
| DR (left) | CR (right) |
|---|---|
| Assets (current and non-current) | Liabilities (current and non-current) |
| Expenses (wages, rent, electricity, etc.) | Income (sales, discount received, rent received) |
| Drawings | Capital |
| Returns inwards (sales returns) | Returns outwards (purchases returns) |
| Carriage inwards | Carriage outwards |
| Discounts allowed | Discounts received |
| Irrecoverable debts | Provision for depreciation |
| Purchases | Provision for doubtful debts |
| Trade payables | |
| Trade receivables |
Memory aid: DR accounts follow DEADCLIC — Drawings, Expenditure, Assets. Everything else is CR.
These appear only as additional information (adjustments applied after the TB is extracted):
The trial balance does NOT reveal errors of:
| Error type | Why it is not revealed |
|---|---|
| Omission | Both sides missing — totals still equal |
| Commission | Wrong personal account — totals unaffected |
| Principle | Wrong class of account — totals unaffected |
| Original entry | Wrong amount, but same amount debited and credited |
| Reversal | Correct accounts and amounts, but swapped sides |
| Compensating | Two or more errors cancel each other out |
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