Page 122 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I

Notes 10.5 Summary

z Trial Balance is a list of accounting balances and their names; of the enterprise during the

specified period which includes debit and credit balances of the various balanced ledger
accounts out of the journal entries.
z Purposes of preparing the Trial Balance is to prepare a statement of disclosure of fi nal
accounting balances of various ledger accounts on a particular date.
z There can be certain errors in recording the accounting transactions in primary and
secondary books of accounts.
z The following errors cannot be detected by the trial balance means inspite of agreeing the
totals of debit side and credit side

™ Error of omission
™ Error of commission
™ Error of principle

™ Compensating error
z The errors which can be located in the trial balance are wrong total, balancing error,
positioning error etc.
z Sometimes, it is not possible to point out errors easily, then the difference is put to an
account, known as suspense account.

10.6 Keywords

Bill of exchange: A bill of exchange is an unconditional order signed by the maker which directs

the recipient to pay a fixed sum of money to a third party at a future date.
Suspense account: Sometimes, it is not possible to point out errors easily, then the difference is
put to an account, known as suspense account.
Trial balance: It is the list of accounts taken from the ledger.

10.7 Self Assessment

Fill in the blanks:

1. ……………… is a statement which shows balances of all accounts on a particular date.
2. The balances of all the liabilities and capital accounts are recorded in the ……………… of
the Trial Balance.

3. The balances of all incomes and gains are disclosed in the ……………… of the Trial
Balance.
4. ……………… is found when one account is debited or credited in the place of another
account.
5. …………………. occur when any business transaction is completely or partially omitted
from the recording in the books of original records.

6. …………………. occur when there is wrong classification between the capital and revenue
nature incomes or expenditures.
7. Suspense A/c is shown in the ………………….

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