Chapter 4- The Trial Balance

Question 1

What is the purpose of a balancing ledger account?

Answer 1

• summarise the data recorded in the account in order that the resulting information may be presented in an understandable form

Question 2

What does the debit balance on an expense account tell us?

Answer 2

• the amount expended to date

Question 3

What does the credit balance on an income account tell us?

Answer 3

• the amount earned to date

Question 4

What does a debit balance on an asset account tell us?

Answer 4

• amount expended to date to acquire the asset and to bring it to its current condition
• may also show current value of the asset if the asset has been revalued

Question 5

What does the credit balance on a liability account tell us?

Answer 5

• amount due to the creditor

Question 6

What does a debit balance represent?

Answer 6

• excess debits over credits
• an asset (recorded in the balance sheet)
• an expense (recorded in the p&l

Question 7

What does a credit balance represent?

Answer 7

• excess credits over debits
• a liability (recorded in the balance sheet)
• income (recorded in the p&l

Question 8

What are the points to note about the trial balance?

Answer 8

1. Only record the balance brought forward on the trial balance
2. If the balance brought forward is recorded in the debit side of the account it is listed under the debit column of the trial balance
3. Trial balance is dated at the end of the trading period

Question 9

What does the trial balance do?

Answer 9

• gives some indication of the reliability of double entry bookkeeping
• lists all the balances b/f and compared the total debits and credits

Question 10

What are some possible reasons the trial balance doesn’t balance?

Answer 10

1. Omitted entry (take difference and see if entry matches)
2. Take difference and divide by 2 if balance matches this have put in two debits or two credits instead of a debit and a credit
3. If difference is divisible by 9 - transposition error

Question 11

The balance brought forward on an expense account would be shown as a _________?

Answer 11

• debit

Question 12

The balance brought forward on an expense account would be shown as a _________?

Answer 12

• debit

Question 13

The balance carried forward on an asset account would be shown as a _______?

Answer 13

• credit

Question 14

What should you do if you identify an error within the double-entry bookkeeping system?

Answer 14

• trace it and correct it