Preparation of Trial Balance helps, mainly in ________.

summarising business transactions

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verifying the 'generally accepted accounting principles' have been observed

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finalising the 'sources and uses of funds' statement

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locating errors, if any, in books of accounts

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Solution

The correct option is D locating errors, if any, in books of accounts
Trial balance is prepared at the end of the financial year to check the accuracy of the books of account. If trial balance agrees, this can be assume that the books of account are arithmetical correct. But there are other types of errors which are there even the trial balance is tally.

Preparation of trial balance helps in locating the following error:
Compensating error
Error ofomission
Error of principle

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Similar questions

State true or false:

1) A Trial balance is an account.
2) A Trial balance is helpful for preparation of final accounts.
3) A Trial balance is most important document.
4) A Trial balance may be prepared on any date.
5) In Trial balance opening stock is recorded in credit balance column.
6) Both sides total of an account are taken in Gross Trial Balance.
7) Purchase account always shows debit balance.
8) A Trial balance is a List of Ledger balances.
9) A Trial balance does not ensure accounting accuracy.
10) A Trial balance shows only arithmetical accuracy.

Q. A Trial balance is helpful for preparation of final account.

State whether the following statements are True or False-

1) A trial balance can agree in spite of certain errors.
2) Errors committed due to lack of accounting knowledge are errors of omission.
3) Trial balance is prepared from the balance of ledger accounts.
4) Rectification entries are passed in cash book.
5) Single sided errors affect only one account.
6) Suspense account is automatically closed after rectification of all errors.
7) Errors affecting the agreement of trial balance are called on side errors.
8) There is no need to open a suspense account if the trial balance agrees.
9) All the errors can be rectified only through suspense account.
10) Compensating errors affect the agreement of trial balance.

Q. There was a difference in the Trial Balance of M/s. Jain & Sons, prepared for the year ended 31st March, 2009. The accountant put the difference in Suspense Account.
The following errors were found:
(i) Purchases Return Book total ₹ 400 has not been posted to Ledger Account.
(ii) ₹ 5,100 spent on legal expense for the newly acquired Building was debited to the Building Account as ₹ 1,500.
(iii) A sale of ₹ 6,540 to Rajat has been credited to his account.
Rectify the errors and show the Suspense Account with Nil closing balance.

Q. The accountant of X prepared the Trial Balance at the end of the year on 31st March, 2015. But there was a difference and the accountant put the difference in a Suspense Account. Rectify the following errors found and prepare the Suspense Account:
(a) The total of the returns outward book ₹ 420 has not been posted in the ledger.
(b) A purchase of ₹ 350 from Y has been entered in the sales book. However Y's Account has been correctly entered.
(c) A sale of ₹ 390 to Z has been credited to his account ₹ 290.
(d) Old furniture sold for ₹ 5,400 had been posted as ₹ 4,500 in Sales Account.
(e) Goods taken by the proprietor ₹ 500 have not been entered in the books at all.

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