A trial balance lists all account balances to check arithmetic accuracy in recording and to help prepare the financial statements. But a balanced trial balance is not an absolute proof of accuracy — it only proves total debits equal total credits. Five kinds of error keep the two totals equal and so escape the trial balance: a wrong amount recorded, a transaction not recorded at all, a posting to the wrong account of a different element, a posting to the wrong account of the same element, and an entry recorded on the wrong sides.
Each error is put right with a correcting journal entry. Two shortcuts do most of the work: a wrong amount is corrected by the difference between the right and recorded figures, while an error recorded on wrong sides (reversed entry) is corrected by twice the amount — one lot to cancel the wrong entry and one lot to post the correct one. A transaction not recorded is entered in full, and a wrong-account error is moved out of the wrong account and into the right one.
Errors are analysed for their effect on profit and on the Statement of Financial Position. Only errors touching an income or expense account change profit: an expense recorded too low (or income too high) overstates profit, and an expense too high (or income too low) understates it. The effect of the error is stated as overstated/understated; the effect of correcting it is stated as increase/decrease — the two are opposite directions.
After correction, the balances are redrawn as an adjusted trial balance (both G2 and G3), which must still balance.