level: Preparing a Trial Balance
Questions and Answers List
level questions: Preparing a Trial Balance
| Question | Answer |
|---|---|
| How will profit for the year be affected by an asset prepayment? | Profit will increase. |
| What balance should accumulated depreciation have on the trial balance? | A credit balance |
| What balance should Allowance for receivables have on the trial balance? | A credit balance |
| Capital Balance = | Open Capital + Profits - Drawings |
| Depreciation Balance = | Equipment at Cost less Accumulated Depreciation less Depreciation for the Year. |
| How will profit for the year be affected by an expense accrual? | Profit will decrease. |
| How will profit for the year be affected by an asset prepayment? | Profit will increase. |
| What is the purpose of the Trial Balance? | A method used to test the accuracy of the double entries and therefore the accounting records. |
| What are the limitations of the Trial Balance? | When: - There is a complete omission of a transaction - Transactions are recorded in the wrong account but on the correct side. - There are cancelling errors - There are errors of 'principle' |
| How are material non-adjusting events disclosed in the financial statements? | By a note in the financial statements. |
| What are non-adjusting events? | Events relate to conditions that arose after the reporting period. |
| What are adjusting events? | Events that provide evidence of conditions that existed at the end of the reporting period. |