Chapter 3 - Balancing Accounts And The Trial Balance

Question 1

What is the reason for Balancing accounts ?

Answer 1

Balancing accounts enables the balances to be used in the trial balance

Question 2

What is the Trial balance used for ?

Answer 2

It is used to check the accuracy of double entry book keeping

Question 3

What does a control account do ?

Answer 3

A control account summarises the total of the entries to a particular set of accounts

E.g the totals of the purchase leger or the totals of the sales leger

Question 4

What are the 4 main control accounts ?

Answer 4

1) Receivables (Sales) ledger control account
2) Payables (Purchase) ledger control account
3) Value added tax (VAT) control account
4) Wages and salaries control account

Question 5

What is the Trial balance made up of ?

Answer 5

The trial balance is the listing of all account balances in two columns Debits on the right and Credits on the Left

Question 6

How would an accountant know if the Trial balance is correct

Answer 6

The Debit column and Credit column equal to the same amount

Question 7

What are the errors that are not revealed by the trial balance ?

Answer 7

*Error of principle
*Error of commission
*Error of original entry
*Error of omission
*Reversal of entries

Question 8

What is an Error of principle ?

Answer 8

This is when a transaction is entered in the Wrong type of account

Question 9

What is an Error of commission ?

Answer 9

This is where a transaction is entered in the Wrong account

Question 10

What is an Error of original entry ?

Answer 10

This is where the transaction has the Wrong amount on both sides

E.g the invoice was for £54 but you have entered it as £45

Question 11

What is an Error of omission ?

Answer 11

This is where the transaction Has not been entered anywhere at all

Question 12

What is an Error of reversal of entries ?

Answer 12

This is where the Credit and debit side have been swapped around