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What is the effect of an error in the trial balance?
Practice Questions
Q1
What is the effect of an error in the trial balance?
It will not affect the financial statements
It will cause the financial statements to be inaccurate
It will always be detected during the audit
It will only affect the balance sheet
Questions & Step-by-Step Solutions
What is the effect of an error in the trial balance?
Steps
Concepts
Step 1: Understand what a trial balance is. It is a list of all the accounts in the accounting system with their balances.
Step 2: Know that the trial balance is used to check if the total debits equal the total credits.
Step 3: Realize that if there is an error in the trial balance, the totals will not match.
Step 4: Understand that financial statements (like the income statement and balance sheet) are prepared using the trial balance.
Step 5: Conclude that if the trial balance is incorrect, the financial statements will also be incorrect, leading to inaccurate financial reporting.
No concepts available.
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