Week 2 - The Trial Balance

Question 1

What is the point of the totals column for debits and credits?

Answer 1

To highlight if something has gone wrong - if they aren’t equal, it has

Question 2

How can it still be incorrect if it balances?

Answer 2

You could have put debits and credits in the wrong ledger accounts

Question 3

What do we want to do first when transforming a trail balance into a set of financial statements?

Answer 3

Classifying each ledger account into one of those elements of the financial statement e.g income, asset e.t.c

Question 4

What is the trial balance?

Answer 4

A list of all the general ledger accounts

Question 5

What does the trial balance do?

Answer 5

Summarises the ledger accounts - shows the period end balance for each one

Question 6

What elements go into the statement of profit or loss?

Answer 6

Income and expenses

Question 7

What elements go into the statement of financial position?

Answer 7

Assets and liabilities and equity

Question 8

What may we need to add to share capital to make the statement of financial position balance?

Answer 8

Retained earnings

Question 9

What are retained earnings?

Answer 9

The accumulated profits made by the company (the profit from the year on our statement of profit or loss gets added on as retained earnings in equity

Question 10

Why do we need to make year end adjustments?

Answer 10

To ensure that the financial statements give a fair picture of the performance for the period just ended and position of the entity at the end of the period

Question 11

What things might we to do make year end adjustments?

Answer 11

• amend trial balance figures for items already included in the ledger accounts
• insert items not yet included in the ledger accounts