wiz-icon
MyQuestionIcon
MyQuestionIcon
1
You visited us 1 times! Enjoying our articles? Unlock Full Access!
Question

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.

Open in App
Solution

(1) True
Explanation:
Trial Balance is prepared to check the arithmetical accuracy of accounts. However, the equality of debit and credit balances of the Trial Balance is not a conclusive proof that it is an error-free statement. Two-sided errors, such as compensating errors and errors of principle will not affect the agreement of the Trial Balance. Thus, a Trial Balance can agree in spite of certain errors. It only ensures the arithmetical accuracy and not the accounting accuracy.

(2) False
Explanation:
Errors of omission occur when a transaction is not recorded in the books of accounts. Errors committed due to lack of accounting knowledge are termed as clerical errors.

(3) True
Explanation:
Trial Balance is a statement prepared from the balances of all ledger accounts to check the arithmetical accuracy of accounts. Debit balance is recorded in the debit column and credit balance is recorded in the credit column of the Trial Balance.

(4) False
Explanation:
Rectification entries are passed in the Journal Proper. The Journal Proper is a residuary book in which only those transactions are recorded that cannot be recorded in any other Subsidiary Book. The Cash Book records the entries related to the receipts and payments of cash.

(5) True
Explanation:
One-sided errors or single-sided errors affect only one account as only one aspect of the transaction has been omitted or wrongly recorded. For example: a sum of Rs 2,500 given to Ajay is correctly recorded in the Cash Book but omitted to be posted to the debit side of Ajay’s Account.

(6) True
Explanation:
Suspense A/c is the account to which the difference in the Trial Balance is transferred, in order to avoid the delay in the preparation of financial statements. Later on, when the errors are identified and rectification entries are passed, the balance of the Suspense A/c becomes zero. It automatically stands closed after the rectification entries for all the errors are passed.

(7) True
Explanation:
One-sided errors are those errors that affect only one account and, thus, lead to the non-agreement of the Trial Balance. These errors are disclosed by the Trial Balance and until such errors are rectified, the Trial Balance will not agree. Some examples of one-sided errors are:
a. Errors of casting
b. Posting to the wrong side
c. Posting of wrong amount
d. Partial omission

(8) True
Explanation:
The Suspense A/c is opened only when the Trial Balance does not agree. The difference in credit and debit totals is transferred to the Suspense A/c. When the Trial Balance agrees, i.e. when the total of all the credit balances and that of the debit balances match, then there is no need to open a Suspense A/c.

(9) False
Explanation:
One-sided errors can be rectified either through the Suspense A/c or by making necessary postings on the debit/credit side (as the case may be) of the relevant account without using the Suspense A/c. On the other hand, two-sided errors are rectified through rectification entries. Thus, it is false that all the errors can be rectified only through the Suspense A/c.

(10) False
Explanation:
Compensating errors occur when the effect of one error is compensated by the effect of another error. Thus, these are two-sided errors and do not affect the agreement of the Trial Balance.

flag
Suggest Corrections
thumbs-up
1
Join BYJU'S Learning Program
similar_icon
Related Videos
thumbnail
lock
Trial Balance
ACCOUNTANCY
Watch in App
Join BYJU'S Learning Program
CrossIcon