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Sunday, 10 June 2018

Balance sheet: Five reasons it is not Tallying.

An accountant is most satisfied when his/her balance sheet tallies, but all the pleasures comes at the great cost of sorrow. Either you are a full-time accountant, an audit trainee or just a struggling student. Tallying a balance sheet is the biggest trouble you ever face. So in this article I have tried to summarize the biggest reasons, why your balance sheet is not tallying.

1. Something is omitted 

Transferring balances from trial balance to balance sheet feels the most easy task, but adjusting them with complex adjustments  given in the question/data and remembering them accurately is the biggest hassle and in this hassle there is always a chance that some balances maybe omitted. This omission is the most common reason for a balance sheet not to Tally.

2. Small errors big tremors 

Even if you have transferred all of the balances from trial balance to balance sheet without any omission. Even then there is always a chance of inaccuracy by the way, of errors. Which are too small to recognise and seldom these errors are not even accounting related they are just silly mistakes which causes major fluctuation in the both of the final balances of the balance sheet. Following are the errors which causes the big tremors.

  • (a) Putting wrong signs of Addition and Subtraction.
  • (b) Out of order drafting.
  • (c) Inaccurate method of estimating Depreciation (etc.)

3. Get your concepts write first 

Accounting is all about concepts  no matter which accountancy body you are following (I.F.R.S, G.A.T ...etc.). You must understand that in which manner their balance sheet is drafted and not only that. Even Basic concept of debit and credit can cause sizable errors. So whenever you are having trouble in Tallying your balance sheet take a break and try to revise/re-examine all the notes related to the conceptual framework.

4. wonders of blunders 

Omission of balances, Sizable errors or Inaccurate concepts. When these three mistakes are collectively occur in a balance sheet then they are not called mistakes they are called blunders. Blunders frequently occurs when you could not manage the data properly. From the start of preparation of the balance sheet and the only  way to avoid them is to be Careful, Systematic, Factual and Punctual in the preparation of financial statements.

5. Lack of practice 

Either you are an accountant a sports person or just a guy/girl cooking at home. If you have not practiced your subject with consistency than do not expect any fruitful results from your work. Accounting is all about concepts/practice and improving them is the only way to improve your skills.
Practice makes Perfect.

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