Chapter 3 - Balancing Accounts And The Trial Balance

Question 1

Control accounts

Answer 1

A control account is a summary account which records the totals of entries to a set of accounts.

Receivables ledger control account shows the total of all the trade receivables accounts in the receivables ledger

Payables ledger control account shows the total of all of the trade payables accounts in the payables ledger.

VAT control account brings together the totals of VAT from the books of prime entry

Wages and salaries control account brings together transactions from payroll accounts

Question 2

Control accounts and the trial balance

Answer 2

The receivables ledger control account is debited on the trial balance and the payables ledger control account is credited on the trial balance.

Question 3

Extracting a trial balance

Answer 3

The purpose of a trial balance is to check the accuracy of the double entry bookkeeping and form the basis of preparation of the year end financial statements of the business

Question 4

If the trial balance doesn’t balance

Answer 4

This is because of the addition of the trial balance and/or an error in the double double entry bookkeeping

Question 5

Errors not revealed by the trial balance

Answer 5

A trial balance does not prove the complete accuracy of the accounting records.

Question 6

Error of principle

Answer 6

Transaction has been entered in the wrong type of account. Eg cost of fuel for vehicles has been entered as a debit to vehicles account where it should have been entered to the vehicle expenses account.

Question 7

Error of commission

Answer 7

Transaction is entered to the wrong account. Eg a sale of goods on credit to customer A has been debited to customer B

Question 8

Error of original entry

Answer 8

The correct accounts have been used and the correct sides but the amount has been entered wrong in both accounts

Question 9

Error of omission

Answer 9

Transaction has been completely omitted from the accounting records so that the debit and credit entries have not been made

Question 10

Reversal of entires

Answer 10

Debit and credit entries have been made on the accounts but on the wrong side of the two accounts. Eg cash sale has been debited to sales account and credited to cash account