We have seen a variety of errors in Mr Wilson's trial balance. The effect of the error will depend on the particular transaction and how it has been treated.
In many cases, as either income or expenses were affected, the profit calculated would be incorrect.
Example 1: |
Drawings included in Wages |
Example 2: |
Stock omitted, therefore Cost of sales incorrect |
Example 3: |
Sales misposted |
Example 6: |
Business/private expense misallocation |
Example 7: |
Capital/revenue misallocation |
Example 8: |
Expense omitted |
Example 10: |
Expense included as asset |
In other cases, profit was not affected, but two balance sheet figures would be incorrect.
Example 4: | Payment of creditors omitted |
Example 9: | Contra between debtors and creditors |
Where an amount was included as one expense instead of another, the profit would be correct, but the detail would be incorrect.
Example 5: | Incorrect analysis of expense |
Note that, even with all these errors, the trial balance still balanced. This, however, will not always be the case - many errors affect the balancing of the trial balance.