Question -
Answer -
There are some errors that are not revealed by a Trial Balance. This inadequacy of the Trial Balance is termed as the limitations of Trial Balance. Here are some of the limitations of a trial balance.
- It is unable to detect errors known as Errors of Complete Omission which arise when an entry is not recorded in the Journal.
- It is unable to detect errors known as Compensatory Errors which is the effect of one error that is cancelled by the effect of another error.
- The Trial Balance fails to reflect errors such as if correct amount is posted in the correct side; but, in the wrong account and if wrong amount is posted in the wrong side, but in the correct account.
- It is unable to detect errors of principle that may take place in the account.
- It is unable to detect errors due to wrong entry in accounts, which can lead to errors.