Limitations of Trial Balance

Limitations of trial balance are the restrictions that prevent the trial balance from detecting errors that result from the journal entry. These may include wrong, missing, or duplicate journal entries.

In this case, even though trial balance lists all balances of general ledger accounts that the company has at the given point of time, it doesn’t mean all transactions have been recorded into ledger accounts.

Moreover, because the trial balance’s role is to make sure that total debits equal the total credits, it doesn’t mean the ledger is correct. Likewise, there are many errors that trial balance cannot detect due to its limitations.

Below is the summary of trial balance limitations:

Limitations of trial balance
Missing transactions It cannot detect errors of not recording the whole transactions at all; e.g. both debit and credit side of transactions were omitted completely from the journal entry.
Duplicate posting It cannot detect errors of duplicate posting or more than one-time posting on the same transaction.
Offset errors It cannot detect offset errors in which accounting transactions were incorrect but offset each other.
Reverse posting It cannot detect the errors of reverse posting in which a debit transaction was entered in an account as a credit, or vice versa.
Wrong amount equally on both sides It cannot detect errors of posting journal entry with incorrect amount equally on both debits and credits; e.g. the expense transaction of $895 was recorded in general ledger as “Dr. Expenses $985 and Cr. Cash $985” instead.
Error of principles It cannot detect errors of principles; e.g. inventory purchase of $500 was recorded as “Dr. Expense $500 and Cr. Cash $500” instead.

All in all, even though the trial balance is useful to check the accuracy of the accounts, it does not mean that there is no error when the total debits equal the total credits.