The Trial Balance
Overview
Every business records thousands of transactions, and the double entry system promises that for every debit there is an equal credit. The trial balance is the quick test of that promise. It is a single list of all the balances in the ledger on a chosen date, set out in a debit column and a credit column, and if the bookkeeping is arithmetically sound the two columns will add up to exactly the same total. It is the accountant's first health check before any financial statements are drawn up.
In this lesson you will learn what a trial balance is for, how to build one from a list of balances, and how to fix one that an inexperienced bookkeeper has put together badly. Just as importantly, you will learn what a balanced trial balance does not prove, because there are six types of error that slip straight past it. Knowing those six is a guaranteed source of exam marks and the foundation for the next topic on correcting errors.
Objectives
- the purposes and limitations of a trial balance.
- how to prepare a trial balance from a given list of balances and amend a trial balance which contains errors.
- the types of errors which do not affect the trial balance: commission, compensating, complete reversal, omission, original entry, principle.
Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on The Trial Balance. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Which of these accounts normally has a credit balance in the trial balance? A. Purchases B. Drawings C. Sales D. Carriage inwards Answer: C
- A trial balance that balances proves that: A. No errors have been made B. The total of the debit balances equals the total of the credit balances C. The financial statements are complete D. All transactions have been recorded Answer: B
- Motor expenses were debited to the motor vehicles account. This is an error of: A. Commission B. Omission C. Principle D. Original entry Answer: C
- Cash received from Malini was credited to Mallika's account. This is an error of: A. Principle B. Commission C. Complete reversal D. Compensating Answer: B
- A bank overdraft of $1 100 appears in the trial balance as a: A. Debit balance of $1 100 B. Credit balance of $1 100 C. Debit balance of $2 200 D. It does not appear Answer: B
Available on the Green Bridge App
Download the Green Bridge CBT app on your phone or computer to access full lesson notes, practice questions, and more.
Available on the Green Bridge App
Download the Green Bridge CBT app on your phone or computer to access full lesson notes, practice questions, and more.
Recommended Books
Practice Mock Questions
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