VERY SHORT ANSWER QUESTIONS
Q1. What is a Trial Balance?
Ans: 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 objective of preparing a Trial balance.
(i) To ascertain the arithmetical accuracy of the ledger accounts.
(ii) To help in locating errors.
Q3. Is a Trial balance conclusive proof of the accuracy of the books of accounts?
Ans: A trial balance is not an absolute or conclusive proof of the accuracy of the books of accounts since there ,may be certain types of errors which may remain undetected in spite of the agreement of trial balance.
Q4. Name two errors which cannot be disclosed by preparing a Trial Balance.
Ans: (i) Errors of Omission
(ii) Errors of Commission
Q5. What are errors of Omission?
Ans: If a transaction remains altogether either in the Journal or in Subsidiary Books, it will be termed as an error of omission. Such an error will not affect the agreement of a Trial Balance, as neither the transaction has been entered on the debit side of an account nor on the credit side of any other account.
Q6. Give one example of error of Omission.
Ans: Suppose goods for ₹10,000 have been purchased from Dinesh on credit and the transaction was omitted to the recorded in the books. The omission will not affect the trial balance in any way, because neither has it been recorded on the credit side of Dinesh nor on the debit side of purchase account.
Q7. What are errors of Commission?
Ans: If a wrong amount is entered either in the Journal or in the Subsidiary Books it is called error of Commission. Trial Balance will tally because the same amount (though wrong) will be posted in both the accounts affected by the transaction.
Q8. Give one example of error of Commission
Ans: Purchase of goods from Ravi for ₹5,000 on credit entered in the purchase book as ₹500.
Q9. What are Compensating Error?
Ans: If the effect of one error is neutralized by the effect of some other error, such errors are called compensating errors.
Q10. Give one example of compensating Error?
Ans: While posting on the debit side of Anil’s account, ₹80 are posted instead of ₹800 and while posting of the debit side of Sunil’s account ₹800 are posted instead of ₹80. These two mistakes will nullify the effect of each other and in spite of the errors in both the accounts, the Trial Balance will still agree.
Q11. What are Errors of Principle?
Ans: When some fundamental principle of Accountancy is violated while recording a transaction, the error is termed as error of principle. These errors are committed in those cases where a proper distinction between capital and revenue items is not made, i.e a capital expenditure is treated as a revenue expenditure or vice versa.
Q12. Give an example of error of principle.
Ans: Purchase of furniture is debited to purchase account instead of furniture account.
Q13. Salary of ₹2,100 was posted as ₹2,000 in salary A/c and advertisement of ₹7,700 was posted as ₹7,800. Identify the type of error.
Ans: Compensating Error.
Q14. Name the error committed by violating the rules of accounting (Chandigarh 2012)
Ans: Error of Principle.
SHORT ANSWER QUESTIONS
Q1. What is Trail Balance? State any four functions of a Trial Balance.
Q2. Trial balance is a link between ledger and final Accounts (C.S Foundation June 2011)
Q3. “Is Trial Balance merely a proof of Arithmetical accuracy”? Explain the errors which are not disclosed by a Trial balance
Q4. Give two examples of Compensation errors.
Q5. What is meant by error of omission? Give any on example.
Q6. What is error of principle? Give two examples.
Q7. Name four errors which cannot be disclosed by preparing a Trial balance.
Q8. What is a suspense account? When is it opened?
Q9. On which side of the Trial Balance, the following Ledger balances will appear:-
I. Purchase Return
III. Bank Loan
IV. Discount allowed
VII. Return Inwards
VIII. Bills receivable
Q10. State whether the balance of the following accounts should be placed in the debit (or) the credit columns of the Trial balance:
(i) Plant and Machinery
(ii) Discount allowed
(iii) Bank overdraft
(v) Interest Paid
(vi) Bad debts
Ans: Dr. Balances (i), (ii), (v), (vi); Cr. Balances (iii), (iv)]
Q11. Classify the under-mentioned errors into:-
(a) Error of Omission, (b) Error of Commission, (c) Compensating Error, and (d) Error of Principle;
(i) Purchased goods from Bhardwaj on credit for ₹ 600, but were recorded in the purchase book as ₹6,000
(ii) Amount paid for the proprietor’s life Insurance premium was debited to ‘ General Expenses Account’.
(iii) Goods amounting to ₹ 2,000 have been returned to Chakarvati, but no entry has been made in the books.
(iv) An excess debit of ₹ 4,500 has been made in the account of X, whereas Y’s account has been credited by ₹5,000 instead of ₹500
(v) Goods sold to Suresh for ₹650 were recorded as ₹560 in the Sales Boo
(vi) Typewriter purchased for office use has been debited to purchases Account.
(vii) Wages paid for the construction of Building ₹15,000 were recorded in ‘Wages account’
(viii) Goods for ₹500 have been taken by the proprietor for his personal use, for which no entry has been passed in the books.
Ans: Errors of Omission III, VIII; Errors of Commission I,V; Compensating errors IV; Errors of Principle II, VI, VII]
Q12. Which of the following errors will affect the Trial Balance?
(i) The total of the sales book has not been posted to the Sales account
(ii) ₹1,000 paid as installation charges of a new machine has been debited to Repairs Account.
(iii) Goods costing ₹4,000 taken by the proprietor for personal use have been debited to debtors Account
(iv) ₹1,000 paid for repairs to Building have been debited to Building account. (NCT Delhi, 2007)
Ans: Only item No. (i) will affect the Trial balance because it is error of posting in one account. Item No. (ii), (iii), and (iv)
will not affect the Trial balance because these are errors of principle.]
Q13. “A Trial Balance is only a prima facie evidence of the arithmetical accuracy of records”. Do you agree with this statement? Give reason.
Ans: A Trial Balance essentially proves the arithmetical accuracy of the books of accounts. If totals of both the sides of a Trial Balance are same then it is proved that books are at least arithmetically correct.
Q14. Trial Balance is an account. Is it correct? Give reason.
Ans: Trial Balance is not an account. It is a statement which shows the names and balances of all the accounts in the Ledger and Cash Book of an enterprise at any given date.
Q15. Trial Balance facilitates the preparation of Final Accounts. Is it correct? Give reason.
Ans: Yes. Trial Balance facilitates the preparation of Final Accounts by making available the balances of all the accounts at one place.
Q16. When is Closing Stock shown in the Trial Balance?
Ans: Closing Stock is shown in the Trial Balance if the Closing Stock is adjusted against purchases.
Q17. State the accounts which are not considered while preparing Trial Balance.
Ans: Accounts which show no balance are not considered while preparing the Trial Balance by Balance Method.
Q18. Give an example of two sided error.
Ans: Machinery purchased for Rs.5000 has been debited to Purchases Alc.
Q19. Give an example of one sided error.
Ans: A sum of 2,500 given to Ajay is correctly recorded in the Cash Book but omitted to be posted to the Debit of Ajay. The error will be termed as one sided error because the error exists in the account of Ajay only.
Q20. What do you mean by Suspense Account?
Ans: When a Trial Balance does not tally, the difference is put to a newly opened account named 'Suspense Account' and the Trial Balance is thus made to tally. In case, the debit side of the Trial Balance exceeds the credit side, the difference is put on the credit side of 'Suspense Account'. Likewise, if the credit side of the Trial Balance exceeds the debit side, the difference is put on the debit side of 'Suspense Account.