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level: Preparing a Trial Balance

Questions and Answers List

level questions: Preparing a Trial Balance

QuestionAnswer
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.