Q. If a company has a trial balance with total debits of $50,000 and total credits of $48,000, what does this indicate?
A.
The accounts are balanced
B.
There is an error in the accounts
C.
The company is profitable
D.
The company has a cash surplus
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Solution
If total debits do not equal total credits, it indicates that there is an error in the accounts that needs to be investigated.
Correct Answer:
B
— There is an error in the accounts
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Q. In a trial balance, how are accumulated depreciation accounts typically classified?
A.
Assets
B.
Liabilities
C.
Contra-assets
D.
Equity
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Solution
Accumulated depreciation accounts are classified as contra-assets because they reduce the value of the related asset on the balance sheet.
Correct Answer:
C
— Contra-assets
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Q. In a trial balance, which of the following would typically have a credit balance?
A.
Accounts Receivable
B.
Inventory
C.
Accounts Payable
D.
Cash
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Solution
Accounts Payable typically has a credit balance, representing amounts owed to suppliers.
Correct Answer:
C
— Accounts Payable
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Q. What is the effect of recording an adjusting entry for accrued expenses on the trial balance?
A.
Increase total debits and total credits
B.
Decrease total debits and total credits
C.
Increase total debits and decrease total credits
D.
Decrease total debits and increase total credits
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Solution
Recording an adjusting entry for accrued expenses increases total debits (expenses) and total credits (liabilities), keeping the trial balance in balance.
Correct Answer:
A
— Increase total debits and total credits
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Q. What is the impact of an error in the trial balance on the financial statements?
A.
No impact at all
B.
It can lead to misstated financial statements
C.
It only affects the balance sheet
D.
It only affects the income statement
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Solution
An error in the trial balance can lead to misstated financial statements, as the inaccuracies will carry over into the final reports.
Correct Answer:
B
— It can lead to misstated financial statements
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Q. Which accounting standard requires the use of a trial balance in the preparation of financial statements?
A.
IFRS
B.
GAAP
C.
Both IFRS and GAAP
D.
Neither IFRS nor GAAP
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Solution
Both IFRS and GAAP do not explicitly 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 error that can cause a trial balance to be out of balance?
A.
Transposition error
B.
Recording a transaction twice
C.
Omitting a transaction
D.
All of the above
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Solution
All of the listed options can cause a trial balance to be out of balance due to errors in recording transactions.
Correct Answer:
D
— All of the above
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