Trial Balance and Rectification of Errors

Topics in this chapter

• Trial Balance Purpose and Limitations
• Classification of Accounting Errors
• Omission and Commission Errors
• Principle and Compensating Errors
• One-Sided Errors and Suspense Account
• Rectification Entries and Financial Statements

Cheat sheet

Practice questions

1. Question 1Q-2DA4DC

   Which of the following errors is not disclosed by a Trial Balance?

   1. A.Error of casting in the sales book
   2. B.Posting an amount to the wrong account on the correct side
   3. C.Omitting to post an entire entry from a subsidiary book to the ledger
   4. D.Posting a debit balance as a credit balance in the trial balance
   See the answer and solution
2. Question 2Q-3A3718

   If a suspense account is opened to tally a trial balance, it will eventually be closed when:

   1. A.All ledger balances are extracted
   2. B.All errors affecting the trial balance are located and rectified
   3. C.The final accounts are prepared
   4. D.The next accounting period begins
   See the answer and solution
3. Question 3Q-7B9B5F

   An amount of Rs. 5,000 received from Mohan was correctly entered in the cash book but was omitted to be posted to Mohan's personal account. What will be the rectifying entry?

   1. A.Debit Cash A/c by Rs. 5,000 and Credit Mohan's A/c by Rs. 5,000
   2. B.Debit Suspense A/c by Rs. 5,000 and Credit Mohan's A/c by Rs. 5,000
   3. C.Debit Mohan's A/c by Rs. 5,000 and Credit Suspense A/c by Rs. 5,000
   4. D.Debit Mohan's A/c by Rs. 5,000 and Credit Cash A/c by Rs. 5,000
   See the answer and solution
4. Question 4Q-325337

   Which of the following is considered an error of principle?

   1. A.Recording a credit sale to Ram as a cash sale
   2. B.Treating the purchase of office furniture as a routine office expense
   3. C.Omitting a transaction entirely from the books of accounts
   4. D.Posting a debit of Rs. 500 to an account as Rs. 50
   See the answer and solution
5. Question 5Q-C63659

   Goods worth Rs. 3,000 returned by a customer were taken into stock, but no entry was passed in the books. This is an example of:

   1. A.Error of commission
   2. B.Error of principle
   3. C.Complete omission
   4. D.Compensating error
   See the answer and solution