Page 147 - DMGT104_FINANCIAL_ACCOUNTING

Unit 7: Trial Balance

7.5 Keywords Notes

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, and then the difference
is put to an account, known as suspense account.
Trial Balance: It is the list of accounts taken from the ledger.

7.6 Review Questions

1. What is a Trial Balance? Name the errors that are disclosed by Trial Balance.
2. What is Trial Balance? Is it true to say that results are accurate if Trial Balance tallies?
3. What do you mean by a Trial Balance? Discuss its main objects and show how it is prepared.

4. Give two examples each of the one sided and doubles sided errors. How are they corrected?
5. Explain the errors (i) which are revealed by the Trial Balance and (ii) the errors which are
not revealed by the trial balance.
6. Is the agreement of a Trial Balance a conclusive proof of accuracy of ledger accounts? If not,
what are the errors which remain undetected by the Trial balance?
7. Discuss the errors which do not affect the agreement of a trial balance.
8. Distinguish between:
(a) Balance Sheet and a Trial Balance
(b) Errors of commission and errors of omission.
9. Write short-notes on the following:

(a) Error of Principle
(b) Compensatory errors
(c) Factors affecting disagreement of Trial Balance.
10. The following balances are extracted from the books of Mr. Rakesh as on 31.12.2005
Prepare a trial balance

( ) ( )
Capital 15,000 Purchases 7 ,200
Land & Building 15,600 Provision for bad debts 370
Bank overdraft 2,500 Sales 17,000
Cash in hand 680 Wages 1250
Stock in Trade as on 1.1.04 6,000 Salaries 700
Advertisement 210 Insurance 40
Rent & Taxes 160 Discount allowed 300
Interest & Discount received 300 Repairs to building 210
Debtors 6420 Creditors 4,100
General Expenses 500

11. Give the journal entries necessary to rectify the following errors:
(a) A payment of 250 for purchase of a Typewriter for office use has been debited to
Purchases A/c.

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