Trial Balance

Question 1

Purpose

Answer 1

First stage in preparing final accounts = to see if making profit or loss and check what assets are worth

Question 2

What is it?

Answer 2

. List of all final balances on all separate ledgers
. One column recording debit balances, one column recording credit balances
. Total of columns should be equal
. Total debits should equal total credits

Question 3

Suspense account

Answer 3

. If balances dont equal, there is an error in book keeping
. If error cant be found in short term can use a suspense ledger account
. DEBIT discrepancy amount on Suspense ledger
. When error found, CREDIT amount on Suspense ledger and DEBIT correct ledger

Question 4

Form

Answer 4

Trial balance as at 30 Sept
Account name DR CR
Cash AC 405
Capital AC 2000
North Bank plc AC 6000
Motor Vehicle AC 7000
Motor Expenses AC 550
Advertising AC 35
Bank Expenses 10

Totals 8000 8000

Question 5

Limitations

Answer 5

. Cant detect breaches of CLC accounts code
. Only checks numerical columns (ie not dates etc)
. Some errors compensate for others (two mistakes may make up to same amount)
. If both both debit and credit entries omitted entirely
. If same error has been made on debit and credit entry
. If entry made on wrong ledger
. If entries were reversed, (debit cash and credit wages instead of vice versa)