Chapter 06 Verification of the Trial Balance

Question 1

What is the purpose of the trial balance?

Answer 1

It is to check the arithmetical accuracy of accounting records. Its secondary purpose is to assist in the preparation of the financial statements.

Question 2

What’s a transposition error?

Answer 2

It occurs when two figures are transposed. For instance $78 recorded as $87. A clue to a transpositional error is that the difference divides by 9.

Question 3

What’s a posting error?

Answer 3

This occurs when one side of the transaction is posted to the wrong side of the account.

Question 4

What’s a partial omission error?

Answer 4

It is when one side of the transaction has been omitted from the books.

Question 5

What’s an unequal posting error?

Answer 5

This occurs when the debit side of the TB does not equal to the credit side of the TB.

Question 6

What are the errors not affecting the trial balance?

Answer 6

• error of omission
• compensating error
• error of commission
• error of reversal
• error of principle
• error of original entry

Question 7

What are errors of omission?

Answer 7

This occurs when both sides of the transaction, both debit and credit, have been omitted by the books.

Question 8

What are compensating errors?

Answer 8

This occurs when the errors on the debit side are the same as the errors on the credit side, therefore they cancel each other out ; compensate for each other.

Question 9

What are errors of commission?

Answer 9

This occurs when an amount is posted to an incorrect account of the same class. For instance, an invoice of $100 has been posted to A. Khan instead of M. Khan.

Question 10

What are errors of principle?

Answer 10

This occurs when an amount is posted to the incorrect class of account. For instance an invoice for motor repairs; an expense is posted to the motor vehicles account ; an asset.

Question 11

What are errors of original entry?

Answer 11

This occurs when an error has been made when transferring the amount from the source document to the books of prime entry.

Question 12

What is an error of reversal?

Answer 12

This occurs when the amount that should have been credited has been debited and vice- versa.

Question 13

What’s a suspense account?

Answer 13

It is a temporary account holding the difference of a trial balance until the cause is found.