Unit 15 Solutions: Trial Balance & Accounting Errors
Answers to the Unit 15 exercises. Each answer is as long as its marks call for: a sentence or two for 1 mark, and full working for the numerical problem.
A. Very Short Answer Questions (1 Mark Each)
1. Define a Trial Balance in one sentence.
A Trial Balance is a statement of all the Debit and Credit balances taken from the Ledger accounts and the Cash Book on a particular date to test the arithmetical accuracy of the books of accounts.
2. Name the three methods of preparing a Trial Balance.
The Total Method, the Balance Method and the Mixed (Compound) Method.
3. Why is the agreement of a Trial Balance not conclusive proof of absolute accuracy?
Because some errors do not affect the agreement of the Debit and Credit totals: errors of omission, errors of commission, errors of principle and compensating errors can all remain hidden in a Trial Balance that agrees.
4. When is a Suspense Account opened, and how is it closed?
A Suspense Account is opened when the Trial Balance does not agree and final accounts cannot wait, so the difference is put in it on the shorter side; it is closed as the errors are found and rectified through journal entries.
B. Numerical Problem for Practice (6 Marks)
Problem 15.1: Prepare a Trial Balance of Bhaktapur Traders as on the last day of Chaitra 2082 from the following balances:
Opening Stock Rs. 25,000 | Purchases Rs. 1,10,000 | Sales Rs. 1,95,000 | Capital Rs. 1,40,000 | Building Rs. 1,20,000 | Debtors Rs. 35,000 | Creditors Rs. 28,000 | Purchase Return Rs. 5,000 | Sales Return Rs. 7,000 | Wages Rs. 18,000 | Salaries Rs. 24,000 | Rent Paid Rs. 12,000 | Commission Received Rs. 6,000 | Cash at Bank Rs. 19,000 | Drawings Rs. 8,000 | Bad Debts Rs. 2,000 | Loan from Bank Rs. 16,000 | Furniture Rs. 10,000.
Trial Balance of Bhaktapur Traders
As on the last day of Chaitra 2082
| S.N. | Particulars (Account Heads) | L.F. | Debit Balance (Rs.) | Credit Balance (Rs.) |
|---|---|---|---|---|
| 1. | Opening Stock A/c | 25,000 | — | |
| 2. | Purchases A/c | 1,10,000 | — | |
| 3. | Sales A/c | — | 1,95,000 | |
| 4. | Capital A/c | — | 1,40,000 | |
| 5. | Building A/c | 1,20,000 | — | |
| 6. | Debtors A/c | 35,000 | — | |
| 7. | Creditors A/c | — | 28,000 | |
| 8. | Purchase Return (Return Outward) A/c | — | 5,000 | |
| 9. | Sales Return (Return Inward) A/c | 7,000 | — | |
| 10. | Wages A/c | 18,000 | — | |
| 11. | Salaries A/c | 24,000 | — | |
| 12. | Rent Paid A/c | 12,000 | — | |
| 13. | Commission Received A/c | — | 6,000 | |
| 14. | Cash at Bank A/c | 19,000 | — | |
| 15. | Drawings A/c | 8,000 | — | |
| 16. | Bad Debts A/c | 2,000 | — | |
| 17. | Loan from Bank A/c | — | 16,000 | |
| 18. | Furniture A/c | 10,000 | — | |
| Grand Total | 3,90,000 | 3,90,000 |
Answer: The Trial Balance agrees, with a Grand Total of Rs. 3,90,000 on both the Debit and Credit sides.
Working notes:
- Debit side: Assets (Building, Debtors, Cash at Bank, Furniture), expenses and losses (Wages, Salaries, Rent Paid, Bad Debts), Opening Stock, Purchases, Sales Return and Drawings:
25,000 + 1,10,000 + 1,20,000 + 35,000 + 7,000 + 18,000 + 24,000 + 12,000 + 19,000 + 8,000 + 2,000 + 10,000 = 3,90,000. - Credit side: Capital, liabilities (Creditors, Loan from Bank), incomes (Sales, Commission Received) and Purchase Return:
1,95,000 + 1,40,000 + 28,000 + 5,000 + 6,000 + 16,000 = 3,90,000. - Watch out: Cash at Bank is an asset (Debit), but Loan from Bank is a liability (Credit). Sales Return is a Debit and Purchase Return is a Credit, the opposite of Sales and Purchases.