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What is the effect of an error in the trial balance on the final accounts?
What is the effect of an error in the trial balance on the final accounts?
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Practice Questions
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Q1
What is the effect of an error in the trial balance on the final accounts?
No effect
It will cause the final accounts to be inaccurate
It will always lead to a profit
It will always lead to a loss
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An error in the trial balance will cause the final accounts to be inaccurate, as the totals will not match.
Questions & Step-by-step Solutions
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Q
Q: What is the effect of an error in the trial balance on the final accounts?
Solution:
An error in the trial balance will cause the final accounts to be inaccurate, as the totals will not match.
Steps: 6
Show Steps
Step 1: Understand what a trial balance is. It is a list of all the accounts in the ledger with their balances.
Step 2: Know that the trial balance should have equal totals for debits and credits.
Step 3: If there is an error in the trial balance, it means the totals for debits and credits do not match.
Step 4: This mismatch indicates that there is a mistake somewhere in the accounting records.
Step 5: When preparing final accounts (like the income statement and balance sheet), the incorrect trial balance will lead to wrong figures.
Step 6: As a result, the final accounts will be inaccurate, which can mislead users of the financial statements.
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