Topic 12 Flashcards by Mohammed Ibrahim

Q

Explain the usefulness of a Trial Balance

A

To prepare final accounts (I.S + S.F.P)
Check arithmetical accuracy of the ledger accounts. If T.B don’t match, errors have been made. If error in accounts, suspense account opened to make sides equal

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Q

Explain the limitations of a Trial Balance

A

Even though it’s equal, errors could still be present if entry has a Dr and Cr.
There are 6 errors which don’t affect trial Balance agreement

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Q

Name the 6 errors which don’t affect Trial Balance agreement

A

Commission
Reversal
Omission
Principle
Original Entry
Compensating

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Q

Explain a Commission Error

A

This is when an amount is posted to the wrong account of the correct type

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Q

What is a Reversal Error

A

This is when the account that should have been debited is credited and vice versa

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Q

What is an Omission error?

A

This is when a transaction is completed ommited from the books of account

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Q

What is a Principle Error?

A

When an amount is posted to the incorrect class of account

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Q

What is a Principle Error?

A

When an amount is posted to the incorrect class of account

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Q

What is a Principle Error?

A

When an amount is posted to the incorrect class of account

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Q

What is a Principle Error?

A

When an amount is posted to the incorrect class of account

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Q

What is a Principle Error?

A

When an amount is posted to the incorrect class of account

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Q

What is an error of original Entry?

A

This is when a mistake is made when transferring an amount from source document to books of original entry

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Q

What is a compensating error?

A

This is when equal and opposite errors cancel each other out.

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Q

Name the 5 errors revealed by a Trial Balance

A

Posting
Unequal posting
Partial omission
Addition
Transposition

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Q

What is a posting error?

A

This is when one side of a transaction is posted to the wrong side of an account. Entry is made in the same side for both accounts

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Q

What is an unequal posting error?

A

Where the debit side of the transaction doesn’t equal the credit side

Q

What is a partial omission error?

A

This is when one side of the transaction is not posted

Q

What is an addition error?

A

Overcasting or undercoating in totaling

Q

What is an error of Transposition?

A

This is when the figures are transposed - correct numbers but wrong order

Q

What is a provision?

A

An amount set aside out of profits for a known expense or liability of an uncertain amount