Q. If a company has a trial balance with total debits of $50,000 and total credits of $48,000, what is the discrepancy?
A.
$1,000 debit
B.
$2,000 credit
C.
$2,000 debit
D.
$1,000 credit
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Solution
The discrepancy is $2,000 debit, as the total debits exceed the total credits by that amount.
Correct Answer:
C
— $2,000 debit
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Q. In a trial balance, which of the following accounts typically has a credit balance?
A.
Accounts Payable
B.
Cash
C.
Inventory
D.
Accounts Receivable
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Solution
Accounts Payable typically has a credit balance, as it represents amounts owed to creditors.
Correct Answer:
A
— Accounts Payable
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Q. What is the effect of an error in the trial balance on the financial statements?
A.
No effect
B.
May lead to incorrect financial statements
C.
Only affects the balance sheet
D.
Only affects the income statement
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Solution
An error in the trial balance may lead to incorrect financial statements, as the trial balance is the basis for preparing them.
Correct Answer:
B
— May lead to incorrect financial statements
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Q. What is the effect of recording depreciation on the trial balance?
A.
Increase in assets
B.
Decrease in liabilities
C.
Decrease in equity
D.
Increase in revenue
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Solution
Recording depreciation decreases the value of assets and also reduces equity, as it is an expense.
Correct Answer:
C
— Decrease in equity
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Q. What should be done if a trial balance does not balance?
A.
Prepare the financial statements
B.
Review the journal entries
C.
Close the accounts
D.
Ignore the discrepancy
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Solution
If a trial balance does not balance, the first step should be to review the journal entries to identify and correct any errors.
Correct Answer:
B
— Review the journal entries
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Q. Which accounting standard governs the preparation of trial balances?
A.
IFRS
B.
GAAP
C.
Both IFRS and GAAP
D.
None of the above
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Solution
Both IFRS (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Principles) provide guidelines for the preparation of trial balances.
Correct Answer:
C
— Both IFRS and GAAP
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Q. Which accounting standard requires the use of a trial balance?
A.
IFRS
B.
GAAP
C.
Both IFRS and GAAP
D.
None of the above
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Solution
Both IFRS and GAAP do not specifically require a trial balance, but it is a common practice in preparing financial statements.
Correct Answer:
C
— Both IFRS and GAAP
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Q. Which of the following is a common reason for discrepancies in a trial balance?
A.
Incorrect journal entries
B.
Accrual accounting
C.
Depreciation methods
D.
Inventory valuation
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Solution
Incorrect journal entries are a common reason for discrepancies in a trial balance, as they can lead to unequal debits and credits.
Correct Answer:
A
— Incorrect journal entries
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