Unit 8 Accounting Systems M2

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Accounting systems (M2) This report will contain the purpose of a trial balance account; describe some of the errors that might cause an imbalance, state why accurate accounting is necessary and why numerical errors might have serious implications for a company. Purpose A standard practice in double-entry bookkeeping systems, which a company prepares periodically, usually at the end of every reporting period, a trial balance is a standard T format account used to produce a quick check of the accuracy of a business’s records so they can make corrections to them to efficiently assemble a profit and loss statement or balance sheet. The procedure is simple and quick, but the does not ensure the company’s records do not contain errors. To assemble a trial balance, all general ledgers. The trial balance is also made so the business can make its end of year accounts – profit & loss account and the balance sheet. Errors Wrong Columns A trial balance is a form of double-entry accounting, which means the accountant enters each transaction twice -- once as a debit and once as a corresponding credit. Listing the item twice in the same column, instead once each in the credit and debit columns, will result in an unequal trial balance. This error can sometimes be difficult to fix, but usually, identifying the double entry and moving one to the correct column solves the problem. Wrong Amounts Entering the wrong amount for one, but not both, entries in a trial balance will cause the trial balance to be unequal. This can result from an incorrect entry or an arithmetic mistake. Arithmetic Error To check whether a trial balance is equal, you must add up the sum of each column. An error in arithmetic will give a result that makes the trial balance appear unequal. This may involve entering a different number than the one that appears on the trial balance into a

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