Page 29 - IC26 LIFE INSURANCE FINANCE

(2) After Preparation of Trial Balance: The errors which are identified in this stage can be categorized in

the following way:-

(a) Errors affecting trial balance: The errors due to which trial balance does not agree and suspense A/c
has to be opened.

(i) Wrong casting of the subsidiary books.

(ii) Wrong balancing of an A/c.

(iii) Posting an amount on the wrong side.

(iv) Wrong posting i.e. writing the wrong amount.

(v) Omitting to post an amount from a subsidiary book.

(vi) Omitting to post the totals of subsidiary book.

(vii) Omitting to write the cash book balances in the trial balance.

(viii) Omitting to write the balance of an account in the trial balance,
(ix) Writing a balance in wrong column of the trial balance

(x) Totalling the trial balance wrongly.

All these errors are rectified through a journal entry in which suspense A/c, which was opened earlier, is
closed. e rectification in this stage is done through journal entry.

(b) The errors that do not affect the trial balance are following :-

i) Omitting an entry altogether from the subsidiary book.

ii) Making an entry in the wrong subsidiary book.

iii) Posting an amount in a wrong account but on the correct side.

iv) Errors of principle.

Compensating errors: If the effect of an error is cancelled by the effect of some other error the trial
balance will naturally agree.

All these errors will be rectified in the same way they were rectified earlier. (By a Journal Entry)

After the preparation of final A/cs : For the correction after preparing final A/c, in the next accounting
year, a special account is opened named as Prior period Items or Profit or Loss Adjustment' A/c Prior
period items should be separately disclosed in the current statement of profit and loss.

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