Accounting chapter 3 (Trial Balance)

Question 1

Define trial balance

Answer 1

A list of balances on the accounts in the ledger at a certain date

Question 2

Purpose of a trial balance

Answer 2

It can help with locating arithmetic errors, however the balancing of the trial balance is not proof that the entries inn the ledger are completely free from errors.

Question 3

Where can the trial balance be useful

Answer 3

it is useful in preparing financial statements

Question 4

Errors that affect the trial balance

Answer 4

1. Error of addition
2. Error of addition within one of the ledger accounts
3. Entering a different figure on the credit side to that entered on the debit side when making a double entry in the ledger
4. Making a single entry rather than a double entry
5. Entering a transaction twice on the same side of the ledger

Question 5

Define Error of comission

Answer 5

When a transaction is entered with the right amount, on the correct side but in the wrong account of the same class

Question 6

Define Error of complete reversal

Answer 6

When the amount of the transaction is correct, it is recorded in the correct account, but the entry has been made in the wrong side of each account

Question 7

Define Error of omission

Answer 7

When the transaction has been completely omitted from the accounting records

Question 8

Define error of original entry

Answer 8

This occurs when an incorrect figure is used when a transaction is first entered in the accounting ledgers

Question 9

Define Error of principle

Answer 9

When a transaction is entered with the correct amount, on the correct side but in the wrong class of account.

Question 10

Define Compensating Errors

Answer 10

This is when two or more errors cancel each other out