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Trial Balance and Rectification of Errors Test 4

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Trial Balance and Rectification of Errors Test 4
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  • Question 1
    1 / -0
    Name the methods in which trial balance can be prepared.
    Solution
    Trial balance can be prepared in three ways:

    1) Total cum balance method- In this method, total and balances both are captured in tabular form. 
    2) Total Method- In this method, total of debit and credit are incorporated in the tabular form.
    3) Balance method- In this method, only balances are taken in the trial balance. 
  • Question 2
    1 / -0
    Preparation of a trial balance helps in locating __________.
    Solution
    Option B is the correct answer.
    Trial Balance is prepared to check and confirm whether posting of all transactions is done in the ledger. If trial balance agrees, it proves that books of account are arithmetically correct. If the total of debit and credit is not matching, it means there are some clerical error. 

    Hence, preparation of trial balance helps in locating the clerical error. 
  • Question 3
    1 / -0
    The main object of audit of accounts of a partnership firm is to __________.
    Solution
    As per the Income Tax Act, Tax Audit is compulsory for the partnership firm if the turnover exceeds Rs. 1 crore in financial year.
    The main object of the audit of accounts of partnership is to ensure the verification of books of account to detect frauds and errors.
  • Question 4
    1 / -0
    Totals method does not help in assuming _________of balances of various accounts.
    Solution
    Totals method is not in use widely as it does not determines the accurate balances of the accounts and thus, also does not help in the preparation of the Financial statements or final accounts.
  • Question 5
    1 / -0
    The amount listed for cash in the trial balance represents __________________.
    Solution
    A Trial Balance is a statement that states the closing balances of all the accounts at the end of the accounting period. Thus, similar to all the other accounts, the closing balance of cash and bank only appears in the Trial Balance.
    Thus, the correct option is D.
  • Question 6
    1 / -0
    In order to detect which of the following is an error, the auditor need not agreed to the agreement of the trial balance?
    Solution
    Option D is correct.
    Purchase of furniture is a capital nature transaction. In such case furniture account should be debited instead of office expenses. This kind of error are classified as "Error of Principle".
    In such kind of error, trail balance will not have any disagreement and show the equal balance. Hence auditor need not to refer the trial balance to detect such error.
  • Question 7
    1 / -0
    Which of the following is not an example of clerical or technical error?
    Solution
    There are four types of error which may arise during the accounting:
    1) Error of Principle
    2) Error of commission
    3) Error of omission
    4) Compensating Error

    Misappropriation of cash is a fraudulent activity and its not fall in any of the error category. 
  • Question 8
    1 / -0
    The Trial balance shows only _________ accuracy. 
    Solution
    A trial balance is a statement showing the balances, or total of debits and credits, of all the accounts in the ledger with a view to verify the arithmetical accuracy of posting into the ledger accounts. Trial balance is an important statement in the accounting process. which shows final position of all accounts and helps in preparing the final statements.
    The purpose of preparing a trial balance is to ascertain whether all debits and credit are properly recorded in the ledger or not and that all accounts have been correctly balanced.  As a summary of the ledger, it is a list of the accounts and their balances. When the totals of all the debit balances and credit balances in the trial balance are equal, it is assumed that the posting and balancing of accounts is arithmetically correct. However, the tallying of the trial balance is not a conclusive proof of the accuracy of the accounts. It only ensures that all debits and the corresponding credits have been properly recorded in the ledger.

  • Question 9
    1 / -0
    A Trial Balance is a list of __________ accounts.
    Solution
    Trial Balance is prepared by taking the balances of all ledger account. It is a list of all ledger account. Trial balance is prepared to check the arithmetical accuracy. 
  • Question 10
    1 / -0
    Trial balance is useful for locating ____________.
    Solution
    The objective of preparing the trial balance is to check the accuracy of posting. If trial balance agrees, it proves that books are arithmetically accurate. If it does not agree, there are chances of error. 
    Hence, Trail balance is useful for locating errors.
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