Trial Balance Limitations - Shortcomings of trial balanceAn agreed trial balance does not
prove by itself that :
1. All transactions have been
correctly analyzed and recorded in proper accounts. For example wages paid for
installation of fixed asset might have wrongly been debited to wages account.
2. All the transactions have been
recorded and nothing has been omitted.
3. Certain types of .errors (listed
below) remain undetected even after the preparation - of trial balance.
Thus it is quite well known and
said that "agreement of trial balance is not the conclusive proof of the
accuracy of the books maintained."
Errors not revealed by (the preparation of) trial balanceNormally four types of errors are
not revealed by mal balance. So two sides of trial balance will although agree,
even then our accounts may not be free from errors. Such errors are :
(i) Errors of omissionIf a transaction is not recorded in
books of original entry then both debit and credit effects of the transaction
will be omitted and trial balance shall not be effected, e.g. goods sold to John
worth Rs. 1,000. The entry is not recorded in the books at all, it means neither
John's account is debited nor sales account has been credited. As both sides
have been effected by equal amount so the mal balance shall agree.
(ii) Errors of commissionThese errors are the result of
carelessness of accounting staff and in some of the cases such errors do not
effect the totals of mal balance, e.g. wrong recording in the books of original
entry or posting to wrong account with correct amount and correct side e.g.
goods sold for cash worth Rs. 1,000 but Cash Nc debited with Rs. 100 and sales
credited with identical amount.
(iii) Compensating errorsSuch errors neutralize the effect
of the errors committed earlier. When one error is committed which affects the
total of mal balance but in the mean time another error of opposite effect is
committed which neutralizes the effect of earlier error, e.g. forgetting to post
Rs. 500 on the debit side of a certain account may be compensated by under
posting of Rs. 500 on the credit side of some other account or by over posting
of Rs. 500 in debit side of some other account.
(iv) Errors of PrincipleWhenever any income or expenditure
is not properly allocated between capital and revenue, the mistake so made is
called a mistake of principle, e.g. if furniture purchased is debited to
purchases account, building sold is credited to sales account, wages paid for
installation of machinery debited to wages account, then the error of principle
is committed; the trial balance shall remain unaffected by such
errors. |
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Central Goods and Services Tax (CGST) Rules, 2017 Draft government Approved Format Under Goods and Services Tax - Invoice Rules What is GST Compliant Business? What are the specific mandatory fields in an GST compliant invoice? Why the invoice an important financial instrument? What are Registered and Un-Registered Dealers? There is a lot for your business to catch up on those links along with online tax filing and registration for trading. Give us the details of required work you want in the off-the-shelf VAT accounting system and we shall make it GST compliant invoicing and accounting for your business at nominal additional charges. Cheers. Happy Accounting. If you want to know the details of for making VAT/CST system compliant to GST system: Standard rate of $15 per man hour shall be applicable for making any of off-the-shelf VAT based accounting software systems into CGST/SGST Compliant Accounting. Give the details of customization required in any of our off-the-shelf VAT accounting systems made for various business to get a quote of additional charges. See demo of software on website. See official Indian Government CGST/SGST Specification on the panel above here. Click for more information on Value Added Tax (VAT). Free Download of Full Featured Software - Try Full Featured Software Before Order - Time Limited 30 days Full Featured Version of these software are available for download from our website www.freeaccounting.in. HiTech Billing, Accounting Software Off-the-Shelf versions are available for Business, Traders, Industry, Hospital, Hotel, Petrol Pump, Medical Store & Distributor, Automobile or Motorcycle Dealers, Newspaper or Magazine Publishers, VAT Accounting & Billing and Commodity Brokers. | ||||||
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