5. Prepare sole trader statement

Errors That Cause the Trial Balance Not to Balance

When preparing a trial balance, the total debits must equal total credits.
Some errors break this equality, making the trial balance show a difference. These errors are easily detectable.

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1. Types of Errors That Cause Imbalance

1.1 Single-Sided Entry (Omission of One Side)

• Definition: Only one side of a transaction is recorded (either debit or credit).

• Effect: Trial balance totals do not match.

• Example: Paid Ksh 5,000 rent but only credited cash; debit not recorded.

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1.2 Transposition Error

• Definition: Digits of a number are reversed when posting.

• Effect: Trial balance difference appears.

• Example: Ksh 540 posted as Ksh 450 (difference = Ksh 90).

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1.3 Addition or Subtraction Error

• Definition: Mistakes in totaling ledger accounts or trial balance columns.

• Effect: Difference appears in trial balance.

• Example: Total of purchases ledger column is 25,000 instead of 26,000.

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1.4 Partial Omission

• Definition: Only one part of a double-entry transaction is recorded.

• Effect: Trial balance does not balance.

• Example: Paid supplier Ksh 3,000 but recorded only debit to supplies account; credit to cash omitted.

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1.5 Carrying Forward or Balance Transfer Error

• Definition: Incorrectly transferring ledger balances to trial balance.

• Effect: Trial balance totals mismatch.

• Example: Ledger balance Ksh 10,000 entered as 1,000.

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2. Key Characteristics

• Trial balance will show a difference.

• Errors are detectable immediately.

• Correction requires identifying the specific account and nature of the error.

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3. Short Exam-Ready Summary

Errors causing the trial balance not to balance include:

1. Single-sided entries (debit or credit missing)

2. Transposition errors (digits reversed)

3. Addition or subtraction errors in ledger totals

4. Partial omission of a transaction

5. Errors in carrying forward balances to trial balance