TN STATEBOARD 11th ACCOUNTNACY - UNIT - 5 - TRAIL BALANCE - BOOK BACK ANSWERS

II. Very Short Answer Questions

Question 1. What is trial balance?

Answer: Trial balance is a statement containing the debit and credit balances of all ledger accounts on a particular date. It is arranged in the form of debit and credit columns placed side by side and prepared with the object of checking the arithmetical accuracy of entries made in the books of accounts and to facilitate preparation of financial statements.

Question 2. Give the format of trial balance.

Answer: Trial balance is prepared in the following format under the balance method:

lll. Short Answer Questions

Question 1. What are the objectives of preparing trial balance?

Answer: Trial balance is prepared with the following objectives:

1. Test of arithmetical accuracy: Trial balance is the means by which the arithmetical accuracy of the book — keeping work is checked. When the totals of debit column and credit column in the trial balance are equal, it is assumed that posting from subsidiary books, balancing of ledger accounts, etc. are arithmetically correct. However, there may be some errors which are not disclosed by trial balance.

2. Basis for preparing final accounts: Financial statements, namely, trading and profit and loss account and balance sheet are prepared on the basis of summary of ledger balances obtained from the trial balance.

3. Location of errors: When the trial balance does not tally, it is an indication that certain errors have occurred. The errors may have occurred at one or more of the stages of accounting process, namely, journalising or recording in subsidiary books, totaling subsidiary books, posting in ledger accounts.

Balancing the ledger accounts, carrying ledger account balances to the trial balance and totaling the trial balance columns, etc. Hence, the errors should be located and rectified before preparing the financial statements.

4. Summarized information of ledger accounts: The summary of ledger accounts is shown in the trial balance. Ledger accounts have to be seen only when details are required in respect of an account.

Question 2. What are the limitations of trial balance?

Answer: The following are the limitations of trial balance:

1. It is possible to prepare trial balance of an organisation, only if the double entry system is followed.

2. Even if some transactions are omitted, the trial balance will tally.

3. Trial balance may tally even though errors are committed in the books of account,

4. If trial balance is not prepared in a systematic way, the final accounts prepared on the basis of trial balance may not depict the actual state of affairs of the concern.

5. Agreement of trial balance is not a conclusive proof of arithmetical accuracy of entries made in the accounting records. This is because there are certain errors which are not: disclosed by trial balance such as complete omission of a transaction, compensating errors and error of principle.

THIS UNIT HAS ONLY THEORY. DON'T STUDY SUMS

IV. Exercises

QUESTION: 1