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Question

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.


Solution

(1) False
Explanation:
A Trial Balance is not an account. It is a statement that is prepared at the end of the accounting year from the balances of all ledger accounts to check the arithmetical accuracy of the transactions entered. It is the summary of the balances of all the ledger accounts.

(2) True
Explanation:
A Trial Balance is a summary of balances of all ledger accounts. Usually, it is prepared at the end of the accounting year from the balances of all the ledger accounts. Financial statements are prepared from the balances of the ledger accounts. Thus, a Trial Balance acts as a basis for the preparation of final accounts.

(3) False
Explanation:
A Trial Balance is not a document but a statement prepared from the balances of all ledger accounts. It is prepared to check the arithmetical accuracy of all the ledger accounts. It shows the summary of balances of all the ledger accounts.

(4) True
Explanation:
A Trial Balance may be prepared at the end of every month, every quarter, half-yearly or yearly. But generally, it is prepared at the end of the accounting year to check the arithmetical accuracy of all the ledger accounts and it also acts as a base for the preparation of final accounts.

(5) False
Explanation:
Opening stock is the current asset of a business and all the assets show the debit balance. Opening stock shows the amount of stock owned by a business at a particular point of time. Therefore, it shows the debit balance and should be recorded in the debit balance column.

(6) True
Explanation:
Gross Trial Balance records the total of the debit and credit side. Totals of the debit side and credit side of each ledger account are entered in the debit balances and credit balances columns, respectively, under Gross Trial Balance. Thus, it can be prepared immediately after posting all the entries in the relevant ledger account.

(7) True
Explanation:
Purchases Account is a part of Trading A/c and shows the amount of goods purchased for a business by a trader for resale. Hence, Purchases A/c always shows debit balance.

(8) True
Explanation:
A Trial Balance is a list of all the ledger balances, i.e. it includes the debit and credit balances of all the accounts. It is a statement that shows the summary of balances of all ledger accounts in order to ascertain the arithmetical accuracy of the transactions entered into. It includes the list of all ledger accounts and the respective balances of each ledger account.

(9) True
Explanation:
A Trial Balance ensures only arithmetical accuracy and not accounting accuracy. A tallied Trial Balance is not a conclusive proof that it is an error free statement because there are a number of errors which still remain in the books of accounts such as errors of omission, errors of commission, compensating errors, errors of principle etc. These are two-sided errors that will not affect the agreement of the Trial Balance.

(10) True
Explanation:
A tallied Trial Balance ensures only arithmetical accuracy of the transactions entered into and not their accounting accuracy. A tallied Trial Balance only ensures that for every debit, there is a corresponding credit. However, it may be possible that the wrong account is debited at the time of recording or posting the transactions or that a transaction is not recorded. Thus, a Trial Balance only ensures arithmetical accuracy.

Accountancy
B.Keeping & Account (2014)
Standard XI

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