Question

My Transaction analysis worksheet figures balance out (assets section = liabilities section); however, is there a possibility that my results are wrong even though the figures balance?

specifically, the cash on hand, account receivable, other current assets, PPE & investments EQUAL TO trade payables, borrowings, other current liabilities, contributed equity and retained earnings.

the total of both aides equal to each other; however , what are the chances that the result is wrong even though both sides balance out

Answer 1

Chances that the result could be wrong here,even balance of both side equal.

1)Accounting principle error.

Either assets is under recorded due to assets capitalization expenses treated as expenses in Trading /profit and loss account.

For example.Wages paid for construction of building $100000 not capitalize but recorded into trading account .

And vice-Versa.

In this manner Assets side will be under recorded by $100000 and and liability side (Retained earning )also under recorded by $.100000 . (Due to Wages $.100000 in trading account)

B)Compensated errors.

When mistake /errors in assets side compensated by Liability side and vice-versa.

For example.trade receivable under recorded $100000 and trade payable also under recorded $100000

C)Errors of Ommission .

When equal amount not recorded into both side of Balance sheet.

For example.

Share issued for cash not recorded for $100000

Share capital amount will be deficit by $100000 (Liability side)

And Cash will be deficit by $100000(Assets side)

Thanks.