Review the bookkeeping mistakes made in Ahhiwalia's accounts below. Identify which errors will affect the agreement of the Trial Balance.
Show answer Hide answer
Answer: B. c, d and f
Explanation
Specific bookkeeping errors related to casting, posting, or balancing affect account totals and cause the trial balance to disagree. Errors like wrong footing in subsidiary books directly alter debit or credit equality. Accountants must investigate and correct these imbalances before finalizing accounts. A trial balance lists all ledger balances to verify mathematical accuracy. Certain mistakes create discrepancies between total debits and total credits. Locating these errors requires systematic checking of journal postings and ledger additions.
Unbalanced trial balances prevent the preparation of accurate financial statements. Bookkeepers use suspense accounts temporarily while investigating underlying discrepancies. Finding these mistakes ensures financial reporting integrity. Some omission and principle errors affect two accounts equally, leaving trial balances balanced. Errors of commission involving correct side postings often maintain equality. Only errors altering debit-credit symmetry trigger trial balance disagreement.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. A debit note serves as the source document for entries in which of these journals?
Show answer Hide answer
Answer: D. Purchase return journal
A debit note serves as the source document for recording returns of goods to suppliers in the purchase return journal. It informs the supplier that their account has been debited for returned merchandise. This document v...
Q2. A price reduction offered for the prompt settlement of an outstanding debt is called ____________?
Show answer Hide answer
Answer: C. Cash discount
A cash discount is an incentive offered to customers for settling their invoices promptly. It encourages buyers to pay debts early by reducing the total amount due. Businesses record this as a discount allowed or financi...
Q3. Financial accounting reports are intended for all of the following external stakeholders except:
Show answer Hide answer
Answer: D. Managers
Managers are internal users of financial information, whereas investors, creditors, and government agencies are external users. Financial accounting focuses on generating standardized reports for outside parties. Interna...
Q4. Which of these accounts normally carries a credit balance on a trial balance?
Show answer Hide answer
Answer: D. Accrued expenses account
Accrued expenses represent liabilities owed by the business and normally carry a credit balance. Liabilities increase with credits and decrease with debits in the ledger. Unpaid operational expenses fall into this liabil...
Q5. During the year-end closing process, a firm discovered that the prior year's ending inventory was overstated by 50,000. Consequently,
Show answer Hide answer
Answer: C. Previous year‘s profit is overstated and current year‘s profit is understated.
An overstatement of ending inventory in the prior year overstates that year's profit while understating the current year's profit due to cost of goods sold effects. Ending inventory becomes the next period's beginning in...
Q6. Dividing the sum of total transferred-out costs and normal spoilage by the number of good units produced calculates ___________?
Show answer Hide answer
Answer: A. cost per good units transferred out
The cost per good unit transferred out is calculated by dividing total transferred-out costs plus normal spoilage by the number of good units produced. This allocation method ensures spoiled units are absorbed properly....