Q.1 What is a Trial Balance?
A list of assets and liabilities
A summary of ledger balances
A financial statement showing profit
A record of cash transactions
Explanation - Trial Balance is a statement prepared to check the arithmetical accuracy of the ledger by listing debit and credit balances.
Correct answer is: A summary of ledger balances
Q.2 Which principle ensures that total debits equal total credits in a Trial Balance?
Matching principle
Dual aspect principle
Revenue recognition principle
Materiality principle
Explanation - The dual aspect principle states that every transaction has two sides – debit and credit – ensuring equality in Trial Balance.
Correct answer is: Dual aspect principle
Q.3 Which of the following errors is revealed by a Trial Balance?
Error of commission
Error of principle
Posting error
Error of omission
Explanation - Errors in posting one side of a transaction affect the equality of debit and credit balances and are revealed by the Trial Balance.
Correct answer is: Posting error
Q.4 A Trial Balance is prepared on the basis of balances extracted from:
Journal
Cash book
Ledger
Final accounts
Explanation - The balances of accounts from the ledger are transferred to prepare the Trial Balance.
Correct answer is: Ledger
Q.5 Which type of error does not affect the Trial Balance agreement?
Single-sided error
Error of omission
Posting to the wrong side
Partial omission
Explanation - If an entry is completely omitted from the books, both debit and credit are missing, so the Trial Balance still tallies.
Correct answer is: Error of omission
Q.6 Suspense account is created when:
Profit is not known
Trial Balance does not agree
Cash is missing
Ledger is incomplete
Explanation - When the Trial Balance does not tally due to errors, a suspense account is temporarily created to balance it.
Correct answer is: Trial Balance does not agree
Q.7 Which of the following is a clerical error?
Error of principle
Error of omission
Compensating error
Error of recording
Explanation - Compensating errors occur when the effect of one error is canceled by another, making them clerical in nature.
Correct answer is: Compensating error
Q.8 If purchases of ₹500 are recorded as ₹50, it is an error of:
Omission
Principle
Commission
Misposting
Explanation - Recording the wrong figure is an error of commission.
Correct answer is: Commission
Q.9 Which of the following is NOT a limitation of Trial Balance?
It cannot detect principle errors
It cannot detect errors of omission
It ensures arithmetical accuracy
It cannot detect compensating errors
Explanation - Trial Balance helps check arithmetical accuracy but cannot detect certain types of errors.
Correct answer is: It ensures arithmetical accuracy
Q.10 Errors affecting both debit and credit sides equally are called:
Compensating errors
Error of principle
Clerical errors
One-sided errors
Explanation - Compensating errors balance each other out and do not affect the tally of the Trial Balance.
Correct answer is: Compensating errors
Q.11 Rectification of errors before preparation of Trial Balance is done by:
Opening entries
Journal entries
Closing entries
Suspense account
Explanation - Errors detected before preparation of Trial Balance are rectified through journal entries.
Correct answer is: Journal entries
Q.12 Which of the following will not affect the agreement of Trial Balance?
Posting wrong amount on one side
Omission of both debit and credit entry
Recording on the wrong side
Partial posting
Explanation - If both sides are omitted, the Trial Balance still agrees because there is no imbalance.
Correct answer is: Omission of both debit and credit entry
Q.13 When wages are debited to Machinery account, it is an example of:
Error of commission
Error of principle
Error of omission
Error of posting
Explanation - Error of principle occurs when a revenue expense is treated as capital or vice versa.
Correct answer is: Error of principle
Q.14 If the debit side of Trial Balance is greater than the credit side, the difference is transferred to:
Suspense account (credit)
Suspense account (debit)
Profit and loss account
Capital account
Explanation - The difference is transferred to the opposite side of the suspense account to balance the Trial Balance.
Correct answer is: Suspense account (credit)
Q.15 Error of principle affects:
Arithmetical accuracy
Accounting treatment
Both debit and credit balances
Ledger closing
Explanation - Errors of principle occur due to violation of accounting principles, not due to arithmetic mistakes.
Correct answer is: Accounting treatment
Q.16 If sales are credited twice, the error is classified as:
Error of omission
Error of principle
Error of duplication
Error of posting
Explanation - When the same entry is recorded more than once, it is called an error of duplication.
Correct answer is: Error of duplication
Q.17 Trial Balance is usually prepared:
At the end of the year only
Periodically during the year
Only when errors occur
Only before final accounts
Explanation - Trial Balance can be prepared periodically to check accuracy and not only at year-end.
Correct answer is: Periodically during the year
Q.18 If machinery purchased is recorded in Purchases account, it is:
Error of omission
Error of principle
Error of commission
Clerical error
Explanation - Recording a capital expenditure as revenue expenditure is an error of principle.
Correct answer is: Error of principle
Q.19 Which error affects only one side of Trial Balance?
Error of principle
Error of omission
One-sided error
Compensating error
Explanation - One-sided errors affect only debit or credit, leading to a difference in the Trial Balance.
Correct answer is: One-sided error
Q.20 Which account is used temporarily until errors are rectified?
Suspense account
Cash account
Trading account
Adjustment account
Explanation - Suspense account is used temporarily to balance the Trial Balance until errors are identified and rectified.
Correct answer is: Suspense account
Q.21 Rectification of errors affecting final accounts is done by:
Adjustment entries
Suspense account
Closing entries
Journal proper
Explanation - Errors affecting profit or loss are rectified using adjustment entries to reflect them in final accounts.
Correct answer is: Adjustment entries
Q.22 The difference in Trial Balance transferred to suspense account will be:
Temporary
Permanent
Capitalized
Written off
Explanation - Suspense account is a temporary account that is closed once all errors are identified and rectified.
Correct answer is: Temporary
Q.23 Which error will affect gross profit?
Error in sales entry
Error in posting expense
Error in capital entry
Error of omission
Explanation - Errors in sales directly affect revenue, which impacts gross profit.
Correct answer is: Error in sales entry
Q.24 Which of the following is detected by Trial Balance?
Errors of principle
Errors of omission
Arithmetical errors
Compensating errors
Explanation - Trial Balance helps in detecting errors in totaling, posting, or balancing.
Correct answer is: Arithmetical errors
Q.25 When goods purchased are omitted to be recorded, the error is:
Error of principle
Error of omission
Error of commission
Compensating error
Explanation - Failure to record a transaction is called error of omission.
Correct answer is: Error of omission