ERRORS IN THE ACCOUNTING PROCESS

An inequality of debits and credits would automatically signal the presence of an error.  Some possible errors that would cause the inequality of the trial balance are:

1. Failing to post part of a journal entries.

2. Posting a debit as a credit, vice versa.

3. Incorrectly determining the balance of accounts.

4. Recording the balance of an account incorrectly in the trial balance.

5. Omitting an account from the trial balance.

6. Incorrectly determining the totals of the two columns of the trial balance.

7. Listing a debit balance of an account in the credit column.

There are several errors committed during the recording the recording process that will not affect the equality of the trial balance. Examples are:

1. Not recording a complete transaction.

2. An erroneous amount is recorded for both debit and credit.

3. A transaction may be recorded twice.

4. A transaction may be recorded correctly but posting a part of the entry to a wrong account.

To locate an error, a bookkeeper normally works backward through the steps in the accounting process starting from:

1. Re-adding the trial balance columns.

2. Compare the trial balance with the balances per account.

3. Verify the balance of each account by re-footing.

4. Verify posting to the ledger.

5. Verify journal entries.

6. Review the transactions, if necessary.

 Reference:

Fundamentals of Accounting P-1 (Accounting for service, Merchandising and Manufacturing)

By: Gloria Ardaniel Rante

Worksheet- is a columnar form which the financial condition of a business enterprise is summarized.  This work facilities the preparation of financial statements.

Preparing A Worksheet

Adjusting Entries Tutorial

       Importance of Adjusting Entries

Adjusting Entries are entries made at the end of the period to assign revenues to the period in which they are earned and expenses to the period in which they are incurred.

Many accounts need adjustments to reflect the current conditions as of time of reporting in order for the statements to be meaningful.  There may be financial data not previously recognize that need to be recorded to make the books of accounts up to date like expenses already incurred but no payment until some time in the subsequent period, and revenues already earned but no cash is collected.  Other transactions like prepayments of expenses may result to over statement of expenses if the unused portion is not adjusted.  

Adjusting entries, therefore, bring the assets, liabilities, revenue and expenses to their correct balances.

 Reference:

Fundamentals of Accounting P-1 (Accounting for service, Merchandising and Manufacturing)

By: Gloria Ardaniel Rante

More about importance of adjusting entries?
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http://www.svtuition.org/2009/11/why-are-adjusting-entries-important.html

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Preparation of Financial Statement

             All accounting reports require a heading which is written on the first three lines at the center of the report being prepared.

1st line - Name of the Company

2nd line - Title of the report or statement

3rd line - Date of report

         For Income Statement, the date is written as: For the month ended________________or for the year ended_________ or for the six months ended_____________

       For Balance Sheet or Statement of Financial Condition, the date is written as: As of a certain date

INCOME STATEMENT SAMPLE

STATEMENT OF CHANGES IN CAPITAL SAMPLE

STATEMENT OF FINANCIAL CONDITION (BALANCE SHEET) SAMPLE

references: 
Fundamentals of Accounting P-1 (Accounting for service, Merchandising and Manufacturing)

By: Gloria Ardaniel Rante

Preparation of Trial Balance

            To prove the equality of debits and credits, let us now prepare a Trial Balance.  A Trial Balance is a list of all accounts with their balances.  Remember that assets, expenses and drawing have normal debit balances, while liabilities, capital and revenue have normal credit balances.

           A Trial Balance is a proof that equal debits and credits have been recorded for all transactions but not a proof that the recording is accurate.  It shows also that the addition of the account balances in the trial balance has been performed correctly, resulting to the equality of debits and credits.

           The accounts in the trial balance are listed in this order according to their account numbers:

    Assets (arranged according to their liquidity)

      Liabilities

      Capital

      Drawing

      Revenue

      Expenses

references: 
Fundamentals of Accounting P-1 (Accounting for service, Merchandising and Manufacturing)

By: Gloria Ardaniel Rante

This is a sample of Trial Bance

Asynchronous Presentation

Accounting Cycle to Trial Balance

http://www.slideshare.net/jhayfox14/accounting-cycle-to-trial-balance-14582287