Is Trial Balance Merely A Proof of Arithmetical Accuracy Or Is Trial Balance A Conclusive Proof of Accuracy of Books of Accounts Explain

Is Trial Balance Merely A Proof of Arithmetical Accuracy Or A Conclusive Proof of Accuracy of Books of Accounts?

Yes, Trial Balance is merely a proof of arithmetical accuracy as it shows that the total of debit account balances are equal to the total of credit accounts balance arithmetically. As it reveals only some sorts of errors, mistakes or frauds which are causing disagreement of trial balance but fails to show hidden and secret types of errors, mistakes and frauds which are causing agreement of trial balance, so it is not a conclusive proof of accuracy of Books of Accounts. This is the main limitation of trial balance.

Note: Here Arithmetical Accuracy means mathematically correction or correction in quantity measurement i.e., the value wise or quantity wise correction.

Eventhough, the total of debit accounts is equal to the total of credit accounts arithmetically but still there are certain types of errors, mistakes or frauds which are not disclosed or revealed in trial balance. Theses errors or mistakes are errors of omission, errors of principle, errors of commission, errors of compensatory, etc.

For example, the transaction related to the goods worth Rs. 5000 sold to customers, Mr. A is completely omitted from books of accounts does not affect any debit or credit side of trial balance and hence trial balance still agrees. This is an example of error of omission as it does not affect any side of a trial balance, so trial balance remain balance arithmetically. This error is corrected by preparing revised books of accounts of sales account and accounts receivable / debtor account recorded on the basis of voucher.

From the above example, if we assume that we recorded the sales amount in Sales Ledger, but forget to record in Mr. A, then there is a partially omission of transaction i.e. only one aspect of a transaction is recorded, then in this case, the trail balance is not in agreement arithmetically as the effect of sales amount is transferred to the credit side of trial balance but not on debit side which is actually written on debit side of Accounts Receivable, Mr. A. This is an example of error causing disagreement of a trial balance.

So, we can say that trial balance is merely a proof of arithmetically accuracy of books of accounts as it fails to show hidden and secret types of errors or mistakes and frauds. In other words, we can say that trial balance is not a conclusive proof of accuracy of books of accounts.

What is Prepared To Test Arithmetical Accuracy Of Books Of Accounts?

In order to check or test arithmetical accuracy of Books of Accounts, the Trial Balance is prepared because all the ledgers’ accounts balances (whether the debit or credit accounts’ balances) are listed in trial balance which must be agreed or equalized in total, otherwise, books of accounts are not arithmetically correct and accurate.