Errors in balancing a ledger account (balancing errors)

Definition and explanation

A balancing error, as the name implies, happens when a general ledger account is wrongly balanced. When an incorrect balance is listed in the trial balance, the totals of the debit and credit columns of the trial balance would not agree. In case of this error, there is no mistake in posting the individual debit and credit entries in the ledger account; rather, it is the balance of the ledger account that is incorrectly computed.

The incorrect balance means that the account balance is either understated or overstated. If an understated or overstated balance is carried forward to the trial balance, its debit and credit columns would produce different totals. A balancing error can therefore be detected by preparing a trial balance.

Suppose, for example, the balance of an expense account is wrongly drawn as $20,000 instead of $22,000. For this error, the balance of the expense account would be understated by $2,000 (i.e., $22,000 minus $20,000), and the total of the debit column of the trial balance would be $2,000 short, creating a discrepancy in the debit and credit columns of the trial balance. Conversely, if the balance of the same expense account is drawn as $25,000 instead of its actual balance of $22,000, the total of the debit column of the trial would be $3,000 excess.

Examples of balancing errors

Example 1 – error in balancing accounts receivable account

The balance of the accounts receivable account was wrongly drawn as $25,000 (debit) instead of $20,000 (debit).

This is a balancing error. For this error, the balance of the accounts receivable account would be overstated by $5,000 (= $25,000 – $20,000), and the total of the debit column of the trial balance would be $5,000 excess.

Example 2 – error in balancing accounts payable account

The balance of the accounts payable account was wrongly drawn as $10,000 (credit) instead of $11,000 (credit). The individual entries were correctly posted to the account.

This is also a balancing error. For this error, the balance of the accounts payable account would be understated by $1,000 (= $11,000 – $10,000), and the credit column of the trial balance would be $1,000 short.