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Q1 State the meaning of a trial balance? Ans: Trial Balance is the list of debit and credit balances, taken out from ledger. It also includes the balances of cash and bank taken from the cash book.
Trial Balance is a statement, prepared with the debit and credit balances of ledger accounts to test the arithmetical accuracy of the books.Q2 Give two examples of errors of principle? Ans: 1) Purchase of furniture is debited to purchase account instead of furniture account.
2) If the amount spent on the repair of an old machinery is debited to the machinery account instead of the repairs account.Q3 Give two examples of errors of commission? Ans: 1) Purchase of goods from Ravi for ₹ 5,000 on credit entered in the purchase book as ₹500.
2) Sale of goods to Ram on credit for ₹ 420 has been entered in the journal as ₹240.Q4 What are the methods of preparing trial balance? Ans: a) Total Method: In this method, ledger accounts are not balanced. They are totaled. These totals are entered in the debit and credit columns.
b) Balance Method: Under this method, the closing balances of ledger accounts are tabulated in a separate statement. The brought down balances are brought to this statement.Q5 What are the steps taken by an accountant to locate the errors in the trial balance? Ans: Step1: Recheck the totals of both the debit and credit amount columns of the Trial balance.
Step2: The exact figure of difference in the Trial Balance should be ascertained. After this, the subsidiary books should be gone through to see if any item of that amount remains unposted
Step3: The difference should be halved to find out if some figure equal to half the difference has been posted on the wrong side of an account thereby making the difference double.
Step4: The difference in the Trial Balance should be divided by 9. If the difference is completely divisible, it can be a mistake of transportation of figures.
Step5: In case, the difference is in a round figure, say ₹1, ₹10, ₹100 etc. There will be a possibility of wrong totalling or wrong carry forwards of the totals of a subsidiary book or there will be an error in the balancing of an account.
Step6: Check with the help of the Ledger whether the balance of each and every account including the balances of Cash and Bank have been included in the Trial Balance on the correct side and with the correct amounts.
Step7: Check whether all the closing balances from the previous year’s Balance Sheet have been correctly carried forward and recorded in respective ledger accounts.
Step8: Check the figures which are not clearly written.
Step9: If the difference is of a very big amount, it is just possible that the balance of a certain Ledger account may not have been included in the Trial Balance.
Step10: If, in spite of all the above efforts, there is still a difference in the Trial Balance, a complete checking of the postings of all the entries will be necessary.
Q6 What is a suspense account? Is it necessary that is suspense account will balance off after rectification of the errors detected by the accountant? If not, then what happens to the balance still remaining in the suspense account? Ans: Suspense Account : Sometimes, inspired by the best efforts of an accountant, all the errors are not located and the Trial Balance does not tally. In such a situation, to avoid the delay in the preparation of final accounts, the difference in the trial balance is placed to a newly opened account known as “Suspense Account” and the Trial Balance tallies.
If the debit side of the Trial Balance exceeds the credit side, the difference will be put on the credit side of the suspense account and if the credit side of the Trial Balance exceeds the debit side, the suspense account will be debited. After including the balance of suspense account in the Trial Balance, it will appear to be tallied.
Q7 What kinds of errors would cause differences in the trial balance. Also list examples that would not be revealed by a trial balance? Ans: 1) Wrong Casting
2) Posting to the Wrong Side
3) Posting of Wrong Amount
4) Omission of Posting of One Side of an Entry
5) Double Posting in a Single Account
6) Errors of Totalling and Balancing of Accounts in the ledger.Q8 State the limitations of trial balance? Ans: A trial balance has some limitations :
1) It does not prove that all transactions have been recorded
2) It does not prove that the ledger is correct
3) Numerous errors may exist even though the trial balance columns agree
4) It cannot find the missing entry from the journal
5) It cannot find the missing entry from the ledger
6) It cannot protect the repeated postings
7) It cannot protect the offsetting errors
8) It cannot protect the errors of principles
9) It cannot protect the errors of commission
10) It cannot protect the errors of omissionIn short, a trial balance does not guarantee freedom from recording errors.