Audit
Financial statement error investigation
Trace a trial balance difference to its cause and correct it.
Quill & Fern Stationers · May 2026
The trial balance extracted at month end doesn't agree, so the difference has been put in a suspense account. Use the diagnostics, trace journals to the ledger and vouch them to source documents, then post a correcting entry for each error you find.
| Account | Debit | Credit |
|---|---|---|
| 1000Cash at bank | 8,770.00 | |
| 1100Accounts receivable | 5,760.00 | |
| 1200Inventory | 8,300.00 | |
| 1350Supplies | 150.00 | |
| 1500Equipment | 15,000.00 | |
| 1510Accumulated depreciation — equipment | 3,000.00 | |
| 2000Accounts payable | 5,650.00 | |
| 2500Bank loan | 9,500.00 | |
| 3000Share capital | 15,000.00 | |
| 3100Retained earnings | 9,200.00 | |
| 4000Sales revenue | 9,490.00 | |
| 5000Cost of sales | 5,200.00 | |
| 6000Salaries expense | 4,100.00 | |
| 6300Utilities expense | 1,420.00 | |
| 7000Interest expense | 60.00 | |
| Totals | 48,610.00 | 51,990.00 |
| 1990Suspense account | 3,380.00 | |
| Totals including suspense | 51,990.00 | 51,990.00 |
Difference: credits exceed debits by 3,380.00. 3 posting errors still affect the trial balance.
Diagnostics on the current difference
- Difference
- 3,380.00
- Difference ÷ 2
- 1,690.00
- Divisible by 9?
- No — a transposition alone is unlikely to explain it.
- Equal to a journal line
- None.
Several errors combine into one difference, so these tests sharpen as you correct errors.
| Journal | Description | Amount |
|---|---|---|
| Cash sales for the week | 3,850.00 | |
| Credit sale to Corvo Ltd | 5,640.00 | |
| Rent for May paid | 2,300.00 | |
| Office supplies bought on credit from Papyra | 450.00 | |
| Receipts from credit customers | 3,900.00 | |
| Electricity bill paid | 1,420.00 | |
| Inventory bought on credit | 4,000.00 | |
| Salaries for May paid | 4,100.00 | |
| Supplier Papyra paid | 2,600.00 | |
| Loan instalment and interest paid | 560.00 | |
| Cost of goods sold for May | 5,200.00 |
JNL-101 · Cash sales for the week
Till Z-report 0502 · 2 May 2026| Date | Account | Debit | Credit |
|---|---|---|---|
| 2 May | 1000Cash at bank | 3,850.00 | |
| 4000Sales revenue | 3,850.00 | ||
| Cash sales for the week (Till Z-report 0502) | |||
What a balanced trial balance can't detect
A trial balance only proves that total debits equal total credits. These errors leave it in balance:
- Original entry — the wrong amount on both sides, as in JNL-106 (1,420 recorded for a 1,240 bill).
- Omission — a transaction not recorded at all.
- Commission — the right type of account but the wrong one (one customer's receipt credited to another customer).
- Principle — the wrong type of account, such as capitalising a repair as equipment.
- Complete reversal — debit and credit accounts swapped.
- Compensating errors — two errors of equal amount that cancel out.
These are found by reconciliations (bank, receivables and payables control accounts, supplier statements), analytical review and vouching to source documents.
Learn it properly
- The unadjusted trial balance · Journal Entries and the General Ledger
- Finding and correcting errors · Journal Entries and the General Ledger
- Substantive testing · Auditing and Internal Controls
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All companies and figures in the simulators are fictional.