 Hello, learners! I welcome you to this session. In this session, we will discuss some other important aspects of trial balance. In the previous video, we have discussed about the concept of trial balance, the format of trial balance that is generally used, as well as the importance of trial balance, which gives us an understanding that trial balance is an important part in the system of recording the transactions. So, on the basis of the correctness of the trial balance, on the basis of the agreement of the trial balance, we can move towards the preparation of final accounts or we can check the errors if we have done any mistakes in the process of recording the transactions. So, let us move to the main topics that we are going to discuss in this particular video. So, after this video, we will be able to know the situations when the trial balance is agreed, as well as when the trial balance does not agree. And the important part is that the mechanism, how the trial balance becomes agreed. And we will discuss the different types of errors, as well as how to look at the errors. So, this will help you in understanding about the importance and how the trial balance is prepared, what is the purpose and how the trial balance gives us an automatic indication towards the correctness of the records that we have maintained. Now, let us move with the situations that may arise. So, when the trial balance agree, it indicates that the process of recording the transactions in the journal, then posting them in a ledger are arachmetically correct. Secondly, it gives us the indication to move forward for the preparation of final accounts. So, this is all about when the trial balance is agreed. But at the same time, we must see the opposite picture of this. Means, when the trial balance does not agree. There may be situations when the trial balance does not agree. So, if the trial balance does not agree, what are the indications for us? The indications are that some mistakes may have been done in the process of recording the transactions or posting the transactions or balancing the ledgers. In any part, any mistakes may have been committed. And that is why the trial balance does not agree. So, it indicates the presence of errors in the process of recording the transactions. Now, before going to the part of discussing the errors that is given by trial balance, that is indicated by trial balance, let us first see the mechanism, how the trial balance is agreed. So, for that we have to start from the stage of the journal. You know about the journalizing process. In this process, for every debit entry, we make a credit entry. So, in this particular example, it's just an imaginary figures with imaginary accounts. Here, we have debited the furniture account and we have credited the cash account. Means, the transaction is we purchase furniture for cash. And on the debit side, we have recorded the amount is rupees 10,000 and the amount recorded on the credit side against cash account is 10,000. So, amount is the same on debit side as well as on the credit side in the process of journalizing the transaction. For the next transaction, we have debited the purchase account and we have credited the cash account. If you see the amount is the same, means on the debit side against cash purchase account, we have recorded rupees 5,000 and on the credit side means against the account cash account, we have recorded rupees 5,000. So, both the amounts are the same on the debit side as well as on the credit side. So, this is the system of recording the transactions in the journal book, where each transaction is recorded by recording the aspects of that particular transaction. We have recorded both the aspects, debit as well as credit aspects and we have recorded the amount of the transaction on both the sides and on the both sides, the amount are the same. Now, each of the debit account in the journal is posted to the respective leisure account in the leisure book with the same amount. Means, for the furniture account, we will have one particular account in the leisure book. For the purchase account, we will have one particular account in the leisure book and we will also record the opposite entries in the cash book. So, each of the credit account in the journal will be posted to the respective leisure accounts with the same amount. So, it means both the accounts, the debit as well as the credit account have been posted to the respective accounts in the leisure book or in the cash book. So, both the aspects have been posted with the same amount. Now, total debit amount is always equal to total credit amount because as we have recorded the same amount on both the sides that is debit and credit in the journal and the same amount is posted to the leisure. So, the total debit and total credit amount will be equal. So, after balancing the leisure accounts, we will prepare the trial balance. So, when we will prepare the trial balance, the debit and credit leisure balances will be recorded in the trial balance with the same amount. Means, if we prepare the leisure account of the furniture account and we post the account from the journal to the leisure, so we will post them with the amount of rupees 10,000. When that particular furniture account will be balanced, the balance will be rupees 10,000 on the debit side. When we will record this particular account on the debit side of the trial balance, the same amount will be recorded on the debit side of the trial balance. So, in this way the credit accounts will also be recorded in the trial balance with the same amount that is coming from the journal and leisure and then leisure balancing. So, all the debit balances and credit balances of the leisure will be recorded in the trial balance. And therefore, trial balance is defined as a list of leisure balances. As all the amounts throughout the process are the same, so the total of debit amount and the total of credit amount will be same in case of trial balance also. Now, in trial balance, if the total debit balance is equal to total credit balance, then it is called that the trial balance is agreed. So, if it is agreed, we can go for the preparation of final accounts. But if the total debit balance is not equal to total credit balance, then it is called that the trial balance does not agree. If the trial balance does not agree, We have to move backward. We have to check why the trial balance does not agree. Even we know that in the entire process we posted, we recorded the same figure against the lasers. So this is very interesting. Now, when the trial balance agree, we are now here the detection of errors. So when the trial balance agree, it means the arachmetical accuracy of the recording and posting and balancing of the lasers. And so we will move to the next step. When the trial balance does not agree, we have to detect the errors that we have committed either in recording the transactions in journal or in posting the transactions from journal to laser or in balancing the laser or in some other part. So when the trial balance agree, we generally say that the process of recording the transactions are arachmetically correct. Here, important point is that even though the process is arachmetically correct, the recording is arachmetically correct, some mistakes may have been there. But the trial balance is unable to detect such errors. So we can classify the errors that may be present in the process of recording the transactions into two groups. Errors disclosed by trial balance and the errors not disclosed by trial balance. So errors disclosed by trial balance, let us first have a discussion on that. Let us first see the causes of disagreement. So this will give us the indication where we have committed the mistakes or why we have committed the mistakes. So omission to post any aspect of a transaction from journal to laser. If we do not post one particular account, one particular laser from the journal to the laser, then the trial balance will not agree because one aspect has not been posted. So one side will be laser. Then recording a wrong amount against an account. Suppose in the example that we have given, furniture account debit, cash account credit, in the furniture account we have recorded 10,000 and in cash account we have recorded rupees 8,000. So this will again make the trial balance disagree. Then we may commit a mistake in calculating the subsidiary books or the laser account. We may also commit mistakes in balancing the laser account. Then we may omit to record a balance of any laser in the trial balance. Then in totaling the columns of the trial balance we may commit some error. Then in totaling the cash or bank balances also there may be some errors. All these make your trial balance disagree and therefore we have to see where are the errors. Means we have to locate the errors. Now how to locate the errors? So here are some of the ways of locating the errors. What we have to do? We have to recheck the total of debit and credit columns of trial balance. We have to check whether all laser balances have been incorporated in trial balance or not. Then we can compare the amount against each laser in the trial balance with the amount of laser accounts in the laser book. Then we can check the cash book. Then we can check the bank balance. We can also check the opponent balances of laser accounts with the balance sheet of the last year. So we are moving backward. If the trial balance does not agree we are moving backward. Then we can check the serial of sundry debtors as well as sundry creditors to ensure that all the debtors and creditors have been included. We can again check the entries in the journal book. So journal book is recorded on the basis of some documentary evidence. So we have to check them again if our trial balance does not agree. Now let us move to the another part. That is the errors not disclosed by trial balance. So in this case the trial balance which agreed means both the amount column of trial balance, debit amount column and credit amount column will agree. Still there will be some errors. These types of errors are number one, error of omission. Means when a transaction is completely omitted to be recorded in the books. For example credit purchase of goods. So if we omit to record this particular transaction it will give us some wrong information. But the trial balance will agree because we have not recorded the entire transaction. Then second one is error of commission. This type of error may arise due to incorrect posting. Then incorrect addition or wrong entry in the original record. Then compensating error. This type of errors are compensated by errors of equal amounts. So this type of error is committed at the time of laser posting. For example if we post one particular account, one particular laser with the amount of rupees 2000 which was originally 4000. And if we record or we post another laser with rupees 4000 which was correct was rupees 2000 then that will compensate the 2000. So this will compensate and the trial balance will not be able to detect death. The trial balance will agree. Errors in principle. This type of error arises from misapplication of the principles of the voluntary system. So this will not affect your trial balance but it will affect the final account. For example if we record the credit purchase of furniture in the purchase account. Then the entry will be there but your final account will give some wrong information irrespective of the fact that the trial balance is agreed. So generally the purchase of furniture on credit is recorded as furniture account debit and we credit the supplier from whom we have purchased the furniture on credit. Instead of that if we record it against the purchase account then it will increase the amount of purchase and it will not show any amount against the furniture account. So this is the error in principle. Duplicating errors. So this type of error arises when a transaction is recorded twice in the journal or posted twice in the laser with the same amount. So this is all about the different errors. That some errors are located by trial balance some or not. So let us see the summary of this particular video. In this video we have discussed the situation that may arise on agreement or disagreement of trial balance. How the trial balance is agreed. The mechanism through which the trial balance becomes automatically agreed or disagree. When the trial balance does not agree it indicates the presence of some errors in the process of bookkeeping and the means of locating the errors disclosed by trial balance. We have also discussed the errors which are not disclosed by the trial balance. These errors are error of commission, error of omission, compensating error, error in principle, duplicating errors. Thank you very much. Hope you have enjoyed the video. Thank you.