Chaper 5 (Trial Balance)

Question 1

Definition of trial balance

Answer 1

A trial balance is a list of all the ledger accounts and their ending balances at a point in time

Question 2

Purpose of a trail balance

Answer 2

• To facilitate the preparation of financial statements
• To ensure arithmetic accuracy in the recording of journal and ledger accounts

Question 3

Limitations of a trial balance

Answer 3

• A transaction that was not recorded at all
• The wrong amount is recorded
• The transaction is recorded in the wrong account of a different element (e.g. should be an expense but recorded as an asset)
• The transaction is recorded in the wrong account of the same element (e.g. should be recorded as Tr Lim but recorded as Tr Lin or should be recorded as rent expense but recorded as repairs expense)