Accounting & auditingLesson 1 of 2 in the course Double-entry bookkeeping

Trial Balances: Normal Balances, Closing Entries, and Undetected Errors

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

A trial balance is a working statement used to check the equality of debit and credit balances in a business’s ledger. It gathers ledger information in one place and provides a starting point for preparing financial reports.

A trial balance is an internal financial statement listing the balances of general ledger accounts at a particular date. It includes accounts with debit balances and accounts with credit balances. Each account appears on a line, with its balance entered in the appropriate column.

All flashcards

Trial balance
A dated list of ledger account balances separated into debit and credit columns.
Normal balance
The side on which an account usually has a balance.
Contra-account
An account whose balance is opposite to the usual balance of the account it relates to.
Closing entry
An end-of-period entry that zeros revenue and expense accounts and transfers the net result to retained earnings.
Compensating errors
Two or more errors whose effects offset one another in the debit-credit totals.

Quiz questions

  1. A business completely leaves a transaction out of its accounting records. Which error type may leave the trial balance totals equal?Answer: Error of omission
  2. A £21 purchase is recorded as £12 on both the debit and credit sides. What type of error is this?Answer: Error of original entry
  3. Fuel expense is debited to postage expense instead. Which error does this illustrate?Answer: Error of commission
  4. At period-end, a business has revenue greater than expenses. What is the effect of closing the accounts?Answer: The profit is transferred to retained earnings, increasing it.
  5. A trial balance shows debit totals of £4,200 and credit totals of £4,050. What is the appropriate conclusion?Answer: The totals disagree, so the records or preparation should be investigated.

Based on the Wikipedia article Trial balance, licensed CC BY-SA 4.0. Adapted into a summary, flashcards and quizzes.

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