Chapter 5 - Trial balance ( not done )

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 trial balance

Answer 2

• To facilitate (help in) the preparation of financial statements
• To ensure arithmetic accuracy in the recording of journal & ledger accounts

Question 3

1st step to prepare a trial balance

Answer 3

-Step 1: Heading-A trial balance needs to be properly titled with the name of the business and the date at which trial balance is prepared

Question 4

2nd step to prepare a trial balance (steps on how to prepare a trial balance)

Answer 4

• Step 2: Classify all the balances of each given account into either Debit column or Credit column accordingly to their individual nature.

Question 5

3rd step to prepare a trial balance (steps on how to prepare a trial balance)

Answer 5

• Step 3: Total up the columns and when the total Debit amount is the same as the total Credit amount, the trial balanced is balanced

Question 6

what goes in the debit column

Answer 6

Debit column= Dr Nature Accounts eg. Assets, Expenses, Sales Returns, Drawings

Question 7

what goes in the credit column

Answer 7

Credit column= Cr Nature Accounts eg. Income, Liabilities, Capital

Question 8

limitations of a trial balance ( Does it mean there are no errors if Trial Balance balance?)

Answer 8

• A transaction that was not recorded at all
• the transaction is recorded in the wrong account of a different element e.g should be an expenses but recorded as asset
• the wrong amount is recorded
• 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