If a company has a trial balance showing total debits of $50,000 and total credi
Practice Questions
Q1
If a company has a trial balance showing total debits of $50,000 and total credits of $48,000, what does this indicate?
The accounts are balanced
There is an error in the accounts
The company is profitable
The company has a cash surplus
Questions & Step-by-Step Solutions
If a company has a trial balance showing total debits of $50,000 and total credits of $48,000, what does this indicate?
Step 1: Understand what a trial balance is. It is a report that lists all the balances of the company's accounts, showing total debits and total credits.
Step 2: Identify the total debits and total credits from the trial balance. In this case, total debits are $50,000 and total credits are $48,000.
Step 3: Compare the total debits and total credits. They should be equal for the accounts to be correct.
Step 4: Notice that total debits ($50,000) are greater than total credits ($48,000). This means there is a difference of $2,000.
Step 5: Conclude that the difference indicates an error in the accounts, as the total debits and credits should always match.
Trial Balance – A financial statement that lists all the balances of the general ledger accounts, with total debits equal to total credits.
Accounting Errors – Mistakes in the accounting records that can lead to discrepancies in the trial balance.
