Trial Balance

Question 1

[Trial Balance]

Benefits of trial balance

Answer 1

• To check the arithmetical accuracy of the double entry records
• Provide a source of information for preparing financial statement
• Provide quick access to information about account balances

Question 2

[Trial Balance]

Errors AFFECT the trial balance. (need suspense account)

Answer 2

1) Transposition error
2) Additional error
3) Partial omission error
4) Unequal posting error (debit 20 but credit 25)
5) Posting error (post as debit, debit or credit, credit)

Question 3

[Trial Balance]

Errors that DO NOT AFFECT the trial balance.

Answer 3

1) Error of commission (wrong account)
2) Error of principle (wrong class)
3) Error of reversal
4) Error of omission
5) Compensating error (error that cancel each other)
6) Error of original entry (wrong amount)

Question 4

[Trial Balance]

Why a trial balance may be arithmetically correct even though errors have been identified.

Answer 4

Some errors (error of comission, omission, principle, reversal, compensating, original entry) will not be shown in trial balance as a result the trial balance will still be balance despite these errors being present

Question 5

[Trial Balance]

Other uses of general journal

Answer 5

1) Opening entries in a new business
2) Depreciation
3) Irrecoverable debt
4) Inter-ledger transfer

Question 6

[Trial Balance]

Uses of suspense account

Answer 6

1) As temporary account used to balance trial balance
2) The book keeper does not know where to post an entry
3) To prepare draft financial statements