What is a trial balance and what does it check?

A trial balance is a list of all the ledger balances, with debit balances in one column and credit balances in another. It checks the arithmetical accuracy of the double entry: if the two column totals agree, the debits and credits have been recorded equally. It is also a convenient starting point for preparing the financial statements. A trial balance that agrees does not prove the books are free of errors.

Which errors do not affect the agreement of the trial balance?

Six errors leave the trial balance still balancing: error of omission (a transaction left out entirely), error of commission (right type of account but wrong account, such as the wrong customer), error of principle (wrong type of account, such as treating a non-current asset as an expense), error of original entry (the wrong amount entered on both sides), complete reversal of entries (debit and credit swapped), and compensating errors (two errors of equal value cancelling out).

What is a suspense account?

When a trial balance does not agree, the difference is entered in a suspense account so the trial balance can be completed temporarily. As each error that caused the disagreement is found, a journal entry corrects it and clears the relevant amount from the suspense account. When all such errors are corrected, the suspense account balance becomes zero and is closed.

How do you correct an error using a journal entry?

Decide what the correct entries should have been and what was actually recorded, then write a journal entry that moves the figures to put it right. If the error caused the trial balance to disagree, the suspense account forms one side of the correcting entry. The journal shows the debit, the credit and a short narrative explaining the correction.

How do corrections to errors affect profit?

An error that wrongly increased or decreased an income or expense changes the profit, so correcting it adjusts the profit. For example, treating a repair (an expense) as a non-current asset overstates profit, and correcting it reduces profit. Errors that involve only statement of financial position accounts, such as posting to the wrong customer, do not change the profit.

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The trial balance and the correction of errors: O-Level Principles of Accounts (SEAB/Cambridge 7087), covering preparing a trial balance from ledger balances, the errors that do not affect its agreement, opening and clearing a suspense account, correcting errors with journal entries, and the effect of corrections on profit

An O-Level Principles of Accounts (SEAB 7087) overview of the trial balance and the correction of errors: preparing a trial balance, the errors it does not reveal, opening and clearing a suspense account, correcting errors by journal entry, and the effect of corrections on profit.

Generated by Claude Opus 4.86 min readSEAB-7087Updated 2026-06-13

Reviewed by: AI editorial process; not yet individually human-reviewed

Jump to a section

Checking the books, then fixing them
The trial balance and the errors it misses
The suspense account and correcting journals
Check your knowledge

Checking the books, then fixing them

Once transactions are posted, two questions follow: do the books balance arithmetically, and are they actually correct? This module of O-Level Principles of Accounts (SEAB/Cambridge 7087) answers both. The trial balance is the arithmetic check; the study of errors and the suspense account is how you find and fix mistakes. The 7087 papers regularly ask for correcting journal entries and the effect on profit, so technique and reasoning both matter here.

This guide links the four dot points of the module. The subject hub is at /sg-o-level/accounting and the syllabus index at /sg-o-level/accounting/syllabus.

The trial balance and the errors it misses

The preparing the trial balance dot point shows how to list ledger balances in debit and credit columns and explains the purposes and limitations of the check. The errors not revealed by the trial balance dot point covers the six errors that leave the trial balance still agreeing: omission, commission, principle, original entry, complete reversal, and compensating errors. The key insight is that an agreeing trial balance proves equal debits and credits, not correctness.

The suspense account and correcting journals

The suspense account dot point shows how the difference on a disagreeing trial balance is held temporarily and cleared as errors are found. The correcting errors with journal entries dot point shows how to write the correcting journal and trace the effect on profit.

Correcting an error of principle and its effect on profit

step 1: identify the error

A motor vehicle repair of $\text{S\textdollar}1{,}200$ was wrongly debited to the motor vehicles account (treated as a non-current asset) instead of to motor expenses. This is an error of principle, and both a debit and a credit were made, so the trial balance still agrees.

step 2: state what is wrong

Motor vehicles is overstated by $\text{S\textdollar}1{,}200$ (it should not include the repair) and motor expenses is understated by $\text{S\textdollar}1{,}200$ (the expense was never charged).

step 3: write the correcting journal

Debit motor expenses $\text{S\textdollar}1{,}200$ ; credit motor vehicles $\text{S\textdollar}1{,}200$ . Narrative: correction of a repair wrongly capitalised as a non-current asset. No suspense account is needed because the trial balance was not thrown out.

step 4: state the effect on profit

The repair is now charged as an expense, so profit falls by $\text{S\textdollar}1{,}200$ . The original treatment had overstated profit by that amount.

Check your knowledge

A mix of recall and correction questions across the module. Work each fully, then check against the solutions.

State two purposes of a trial balance. (2 marks)
Name the error where a transaction is completely left out of the books. (1 mark)
Explain why an error of principle does not affect the agreement of the trial balance. (2 marks)
A trial balance shows total debits of $\text{S\textdollar}84{,}300$ and total credits of $\text{S\textdollar}84{,}000$ . State the suspense account entry needed to make the trial balance agree. (2 marks)
A sale of $\text{S\textdollar}700$ was credited to sales but not posted to the customer's account. Give the correcting journal entry. (3 marks)
Treating a repair of $\text{S\textdollar}900$ as a non-current asset has what effect on profit, and how is it corrected? (3 marks)

Solutions

Q1: To check the arithmetical accuracy of the double entry (debits equal credits), and to provide a convenient starting point for preparing the financial statements.
Q2: Error of omission.
Q3: An error of principle posts both a debit and a credit, just to the wrong type of account, so equal debits and credits are still recorded and the trial balance still agrees.
Q4: Debits exceed credits by $\text{S\textdollar}84{,}300 - \text{S\textdollar}84{,}000 = \text{S\textdollar}300$ . Enter a credit of $\text{S\textdollar}300$ in the suspense account so both totals are $\text{S\textdollar}84{,}300$ .
Q5: Debit the customer (trade receivable) $\text{S\textdollar}700$ ; credit suspense $\text{S\textdollar}700$ . Narrative: correction of a credit sale omitted from the customer's account, which had caused the trial balance to disagree.
Q6: Capitalising the repair overstates profit by $\text{S\textdollar}900$ , because the expense was never charged. Correct it by debiting the repair expense $\text{S\textdollar}900$ and crediting the non-current asset $\text{S\textdollar}900$ ; profit then falls by $\text{S\textdollar}900$ .

Sources & how we know this

Principles of Accounts (Syllabus 7087) — Singapore Examinations and Assessment Board (2026)
Singapore-Cambridge GCE Ordinary Level (joint SEAB and Cambridge examination) — Singapore Examinations and Assessment Board / Cambridge Assessment International Education (2026)