NCERT MOST IMPORTANT QUESTIONS CLASS – 11 | ACCOUNTANCY IMPORTANT QUESTIONS | CHAPTER –6 Trial Balance and Rectification of Errors| EDUGROWN |

NCERT Most important question:

Q1. What are the objectives of preparing a trial balance?

Ans: The following are the three main goals of trial balance preparation:

• Verify that the ledger account is arithmetically correct.
• It aids in the detection of account mistakes.
• It aids in the preparation of the firm’s final account.

Q2. How rectification of errors is done.

Ans: If the error affects just one account, it can be corrected either by creating a journal entry or by providing an explanatory note, however if the error affects many accounts, it can only be corrected by submitting a journal entry.

Q3. What is the purpose of suspense accounts?

Ans: Even if the trial balance does not match the ledger, the suspense account aids in the preparation of the company’s financial statement. They are temporary accounts since they are prepared for a limited length of time and for a specific occasion.

Q4. What is the process of preparing trial balance?

Ans: The following is the procedure for preparing trial balance:

• Determine the balance of each ledger account. 
• Enter the balances of all debit and credit accounts in the appropriate columns.
• Add up the amounts on both the debit and credit sides.
• Balance the trial balance on the debit and credit sides.

Q5. What are the significance of agreement of trial balance?

Ans: The trial balance should balance, meaning the credit and debt sides should be equal. It will demonstrate that transaction inputs are correct and ledger calculations are arithmetically correct. It does not, however, prove that the transactions were accurately recorded.

Q6. Rectify the following errors in journal entry:

Cash sales Rs. 12,000

i) Were posted as 5,000 in sales account.

ii) Were posted to purchase account.

iii) Were not posted to sales account

Ans:

Particular	Debit	Credit
(i) Suspense A/c                          Dr. To Sales A/c       (Cash sales of 12,000 were recorded as 5,000 in the sales account, which has since been corrected.)(ii) Purchase A/c                            Dr.  To Sales A/c                 (Cash sales were posted to the purchase account instead of the sales account, which has already been addressed.)(iii) Suspense A/c                        Dr. To Sales A/c  (Cash sales that were not posted to the sales account have now been corrected.)	7,000 12,000 12,000	7,000 12,000 12,000

Q7. What are the ways of locating accounting errors by an accountant?

Ans: An accountant’s procedure for discovering accounting problems is as follows:

i. Determine whether the totals on both the debit and credit sides are equal.

ii.The ledger account balance should be compared to the trial balance balance.

iii. Compare the total of the debtor’s and creditor’s accounts to the trial balance and balance them.

iv. Compare the sum of the journal entry book to the ledger.

v. Double-check that all transactions are correctly and accurately recorded in the journal entry book.

vi.Compare the current year’s trial balance to the previous year’s trial balance prior year’s trial balance to see whether any figures are incorrect. Omitted

Q8. Explain the Various classifications of errors:

Ans:  The Various classifications of errors are explained below:

i. Commission errors: If transactions are recorded incorrectly, transaction totaling is incorrect, transactions are casted incorrectly, or transaction balancing is incorrect.

ii. Omission Inaccuracies: Omission of recording can result in errors in an account; these omissions in transactions might affect the account totally or partially.

iii. Principle Errors: Misplacement of payments and receipts between revenue and capital receipts and revenue and capital expenditure causes errors.

iv. Compensating errors: When two or more errors are reported in such a way that the effect of both is negated.

Q9. Explain the different methods of preparation of trial balance.

Ans:  A trial balance can be prepared in one of three ways:

i. Totals method: On the same side of the trial balance, the totals of each side as debit and credit of the ledger are indicated. As a result, the debit and credit sides of the trial balance must be balanced.

ii. Account balance: The credit and debit sides of the trial balance reflect the balances of all ledger accounts.

iii. Total-cumulative-balance account: This method combines the total and balance methods. This approach creates four columns, two of which contain debit and credit from the total method while the other two columns contain debit and credit from the balance method.

Q10. Define the various limitations of trial balance?

Ans:  The following are some of the trial balance’s limitations:

i. An entry that is not made in the journal will not appear in any of the ledge accounts. As a result, there will be no variation in trial balance.

ii. If an entry is made in the wrong account but on the proper side, the trial balance is unaffected.

iii. If an incorrect amount is written in the journal, the trial balance cannot be used to identify it.

iv. There will be no difference in the trial balance if the entry is not allocated to the correct account.Is this page helpful?

Q11. State the meaning of a Trial Balance.
Ans

Trial balance is a statement prepared to check the arithmetical accuracy of transactions recorded in the journal, posted into the ledger and balanced in the ledger accounts.  The balance of ledger accounts shows the difference between the total of the debit items and credit items in an account. Personal, real and nominal accounts are considered for preparing the trial balance. Generally, it is prepared at the end of an accounting year. However, it may be prepared at the end of any chosen period, which may be monthly, quarterly, half yearly or annually depending upon when it is required. It helps in the preparation of the financial statements.

Q12. Give two examples of errors of principle?
Ans

 Generally accepted accounting principles are to be followed to record the accounting entries. When accounting entries are recorded in contravention of accounting principles, it is known as an error of principle.

1. Wages paid for installation of new machinery debited to wages account:
2. Wages paid for installation of new machinery is a capital expenditure and accordingly machinery account should have been debited. But, here it is treated as revenue expenditure and is debited to wages account. Thus, it violates the accounting principle.
3. Amount spent on repair of building debited to machinery account: Expense on repair is revenue expenditure and not a capital expenditure. The amount should have been debited to repairs account and to the machinery account which is a capital account. Thus, it violates the accounting principle.

Q13. Give two examples of errors of commission?
Ans

 Errors of commission are committed because of wrong recording, wrong posting, wrong balancing and wrong casting of subsidiary books. Such errors affect the accuracy of the trial balance.

1. Cash received from a creditor worth Rs.5,000 is recorded in the cash book as Rs.500.
   The transaction is recorded in the cashbook as Rs.500 instead of Rs.5,000. This is an error because of the wrong recording of amount in the cash book.
2. Amount received from Arun Rs.2,000, is wrongly posted in Tarun’s account.
   In this transaction, Tarun’s A/c is credited instead of Arun’s A/c. This is referred to as an error of wrong posting of transactions.

Q14. What are the methods of preparing trial balance?
Ans

A trial balance can be prepared in the following three ways :

1. Totals Method: In this method, the total of the debit and the credit side of the ledger is determined and presented separately in the trial balance. The total of both the sides should match as the accounts are based on double entry system.
2. Balances Method: In this method, the balances of all ledger accounts are presented in their respective debit and credit columns of the trial balance. The total of both the sides should match as the accounts are based on double entry system and this method of preparing a trial balance is widely used because it helps in the preparation of financial statements.
3. Totals-cum-balances Method: This method is a blend of the totals and balances method. This method has four columns. The first two columns are to write the totals of the debits and credits of the various accounts and the other two columns are to write the debit or the credit balances of these accounts. This method is time consuming, and hence are not used widely.

Q15. What are the steps taken by an accountant to locate the errors in the trial balance?
Ans

Steps to identify the errors:

1. Recast the totals of the debit and credit columns of the trial balance.
2. Compare each account head and its amount appearing in the trial balance with that of the ledger to detect any difference in amount or omission of any account.
3. Compare the trial balance of the current year with that of the previous year to check the additions or deletions to any accounts and to verify if there is any unexplained difference in amounts.
4. Re-check the correctness of balances of individual accounts in their respective ledgers.
5. Re-check the accuracy of the postings in individual accounts from the transactions entered in the books of original entry.
6. If the difference between the debit and credit columns is of `1, `10, `100 or `1000, the casting of the subsidiary books should be re-checked.
7. If the difference between the debit and credit columns is divisible by 2, then there is a possibility that an amount equal to half the difference may have been posted to the wrong side of another ledger account.
8. The above point may also indicate a complete omission of a posting.
9. If the difference is divisible by 9, the mistake could be because of transposition of figures.
10. Still, if it is not possible to locate the errors, the difference in the trial balance for that moment is transferred to the suspense account. All the one-sided errors detected are rectified through this account.

Q16. What is a suspense account? Is it necessary that 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 suspense account?
Ans
In certain cases, when the debit column and the credit column of a trial balance do not agree, then the difference of the trial balance is transferred to a temporary account which is called a suspense account. This account is created to avoid any delay in creation of the financial statements. If the debit column falls short of the credit column, then the suspense account is debited and if the credit column falls short of the debit column then the suspense account is credited.

When all the errors are detected and rectified, then the suspense account automatically gets balanced. However, when errors still exist and are not rectified, the suspense account will not balance off and the balance amount of the suspense account will have to be transferred to the balance sheet. The debit balance of the suspense account is shown on the assets side and the credit balance is shown on the liabilities side of the balance sheet.

Q17. What kinds of errors would cause difference in the trial balance? Also list examples that would not be revealed by a trial balance? 
Ans
One-sided errors are the errors which when committed affect the agreement of the trial balance. These errors affect only one account and any one side i.e. debit or the credit side of the account. Errors of partial omission, recording transactions with wrong amount, casting, posting of incorrect amount are examples of one-sided errors.
Two-sided errors do not affect the agreement of the trial balance. Here, are a few examples which would not be revealed in a trial balance:

1. Purchases from Mr. Shah, completely omitted to be recorded in the purchase book.
2. Purchases made from Vijesh, recorded in Ritesh’s account who is another creditor.
3. Stationary purchased for office use recorded in the purchase book.