Unit-4 Trial Balance and Rectification of Errors
1. **What is the primary purpose of preparing a trial balance?**
- A. To record all transactions in the books
- B. To verify the correctness of the ledger balances
- C. To balance all debits and credits without errors
- D. To list out the profit or loss directly
- **Answer:** B. To verify the correctness of the ledger balances
2. **Which of the following methods is most commonly used to prepare a trial balance?**
- A. Totals Method
- B. Balances Method
- C. Totals-cum-Balances Method
- D. Debit-Credit Balance Method
- **Answer:** B. Balances Method
3. **Errors of commission refer to mistakes in which aspect of accounting?**
- A. Omission of recording transactions
- B. Wrong classification of expenses
- C. Wrong totaling or posting of transactions
- D. Complete reversal of transactions
- **Answer:** C. Wrong totaling or posting of transactions
4. **Which of the following is an example of an error of principle?**
- A. Credit sales wrongly entered in the cash book
- B. Classifying capital expenses as revenue expenses
- C. Understating a balance in the ledger
- D. Double posting of an entry in the ledger
- **Answer:** B. Classifying capital expenses as revenue expenses
5. **If the total debits do not equal the total credits in a trial balance, which of the following is likely to be used?**
- A. Profit and Loss Account
- B. Suspense Account
- C. Adjustment Entry
- D. Cash Flow Statement
- **Answer:** B. Suspense Account
6. **Which of these errors will not affect the trial balance totals?**
- A. Misstated sales amount
- B. Posting a debit as credit
- C. Entry omission in both debit and credit
- D. Understatement in the cash balance
- **Answer:** C. Entry omission in both debit and credit
7. **What type of error occurs when two or more mistakes cancel each other’s effect on the trial balance?**
- A. Error of omission
- B. Compensating error
- C. Error of principle
- D. Error of commission
- **Answer:** B. Compensating error
8. **Which one is not considered an error of commission?**
- A. Overstating a purchase entry
- B. Understating a debt amount
- C. Wrong classification between capital and revenue expenditure
- D. Misposting sales as purchase
- **Answer:** C. Wrong classification between capital and revenue expenditure
9. **What does a trial balance show?**
- A. A summary of all assets and liabilities
- B. The balances of all ledger accounts
- C. The total revenue and expenses for the year
- D. Cash flow for the accounting period
- **Answer:** B. The balances of all ledger accounts
10. **Which of the following errors will impact the agreement of a trial balance?**
- A. Omission of a transaction in both debit and credit
- B. Wrong classification of revenue expenditure
- C. Recording credit sales as debit in a different account
- D. Duplication of an entry in both debit and credit
- **Answer:** C. Recording credit sales as debit in a different account
11. **Which of these errors is identified by a trial balance but does not ensure accurate ledger balances?**
- A. Errors of omission
- B. Errors of principle
- C. Compensating errors
- D. Error of transposition
- **Answer:** D. Error of transposition
12. **If the difference in the trial balance is divisible by 9, it may indicate a:**
- A. Compensating error
- B. Transposition error
- C. Commission error
- D. Principle error
- **Answer:** B. Transposition error
13. **When a trial balance does not tally, which of these steps is NOT recommended for locating the error?**
- A. Rechecking ledger balances
- B. Comparing trial balance totals with previous years
- C. Using suspense accounts directly without checking
- D. Recalculating trial balance columns
- **Answer:** C. Using suspense accounts directly without checking
14. **Which error can be corrected by a single journal entry without affecting the suspense account?**
- A. Errors of commission
- B. Errors affecting only one side of an account
- C. Errors of complete omission
- D. Compensating errors
- **Answer:** C. Errors of complete omission
15. **An error in recording cash sales as credit sales is an example of:**
- A. Error of commission
- B. Error of omission
- C. Error of principle
- D. Compensating error
- **Answer:** C. Error of principle
16. **Which account is temporarily used to balance the trial balance when it does not tally?**
- A. Bank Account
- B. Cash Account
- C. Suspense Account
- D. Adjustment Account
- **Answer:** C. Suspense Account
17. **What is the main objective of balancing the debit and credit columns in a trial balance?**
- A. To verify cash balances
- B. To check arithmetical accuracy
- C. To identify one-sided errors
- D. To determine profit or loss
- **Answer:** B. To check arithmetical accuracy
18. **Which of the following errors will cause a trial balance to be out of balance?**
- A. Capital expenditure recorded as revenue expenditure
- B. Double entry recorded for a single transaction
- C. One-sided posting of a ledger entry
- D. Compensating error in both debit and credit
- **Answer:** C. One-sided posting of a ledger entry
19. **What type of error is it when purchases are recorded in the sales book?**
- A. Error of omission
- B. Error of principle
- C. Compensating error
- D. Error of commission
- **Answer:** B. Error of principle
20. **When wages for installing a new machine are debited to the Wages Account, it is an example of:**
- A. Error of omission
- B. Compensating error
- C. Error of principle
- D. Error of commission
- **Answer:** C. Error of principle
21. **Which of the following is a correct statement about trial balance?**
- A. It provides a guarantee of accuracy in the ledger
- B. It confirms that every transaction has been posted correctly
- C. It checks only the arithmetical accuracy of accounts
- D. It calculates the net profit or loss
- **Answer:** C. It checks only the arithmetical accuracy of accounts
22. **An error where the same amount is recorded twice on the debit side of an account is known as:**
- A. Error of omission
- B. Error of principle
- C. Error of duplication
- D. Compensating error
- **Answer:** C. Error of duplication
23. **When a transaction is omitted from the books entirely, this is known as an error of:**
- A. Principle
- B. Complete omission
- C. Partial omission
- D. Commission
- **Answer:** B. Complete omission
24. **If credit sales to a customer are recorded as cash sales, it is an example of:**
- A. Error of principle
- B. Compensating error
- C. Error of omission
- D. Error of commission
- **Answer:** D. Error of commission
25. **Which of the following types of errors is generally unaffected by the trial balance agreement?**
- A. Omission errors
- B. Principle errors
- C. Commission errors
- D. Transposition errors
- **Answer:** B. Principle errors
26. **If a transaction of ₹4,500 is recorded as ₹5,400, what kind of error has occurred?**
- A. Transposition error
- B. Compensating error
- C. Omission error
- D. Principle error
- **Answer:** A. Transposition error
27. **Which of these errors can be corrected by using a suspense account?**
- A. Errors of omission in both debit and credit
- B. Errors affecting only one account
- C. Principle errors
- D. Errors of commission
- **Answer:** B. Errors affecting only one account
28. **If the purchase account is undercast by ₹500, how will this error be rectified?**
- A. Debit Purchase Account by ₹500
- B. Credit Purchase Account by ₹500
- C. Debit Suspense Account by ₹500
- D. Credit Suspense Account by ₹500
- **Answer:** A. Debit Purchase Account by ₹500
29. **Which of the following accounts would typically have a debit balance?**
- A. Sales Account
- B. Capital Account
- C. Cash Account
- D. Creditors Account
- **Answer:** C. Cash Account
30. **What type of error is it if an amount of ₹2,000 received from a debtor is posted to the credit of a different debtor’s account?**
- A. Error of principle
- B. Error of commission
- C. Compensating error
- D. Complete omission
- **Answer:** B. Error of commission
31. **Which error will likely lead to an imbalance in the trial balance?**
- A. Purchases omitted in both debit and credit
- B. Recording sales in the wrong account with the correct amount
- C. Posting the purchase amount in the wrong side of the account
- D. Classifying capital expenditure as revenue expenditure
- **Answer:** C. Posting the purchase amount in the wrong side of the account
32. **What is the purpose of a suspense account?**
- A. To balance one-sided errors in the trial balance
- B. To calculate net profit for the period
- C. To classify assets and liabilities
- D. To reconcile bank statements
- **Answer:** A. To balance one-sided errors in the trial balance
33. **Which of the following would NOT affect the trial balance agreement?**
- A. Overstating purchases on both debit and credit sides
- B. Recording a revenue item as an expense
- C. Posting cash as credit when it should be debit
- D. Omitting an entry in both debit and credit columns
- **Answer:** D. Omitting an entry in both debit and credit columns
34. **The preparation of a trial balance helps to identify:**
- A. Both one-sided and two-sided errors
- B. Only two-sided errors
- C. Errors of principle
- D. Errors in financial statements
- **Answer:** A. Both one-sided and two-sided errors
35. **When preparing the trial balance, a ledger account with zero balance is:**
- A. Ignored in the trial balance
- B. Listed with a zero balance
- C. Recorded in either debit or credit column
- D. Combined with another account
- **Answer:** B. Listed with a zero balance
36. **If goods worth ₹2,000 were withdrawn by the owner for personal use and recorded as sales, this is an example of:**
- A. Error of commission
- B. Error of principle
- C. Compensating error
- D. Error of omission
- **Answer:** B. Error of principle
37. **In a trial balance, which of the following is likely to have a credit balance?**
- A. Debtors Account
- B. Cash Account
- C. Purchases Account
- D. Sales Account
- **Answer:** D. Sales Account
38. **Which error does NOT affect the trial balance agreement?**
- A. A cash payment of ₹1,500 recorded as ₹1,800
- B. Classifying a capital item as a revenue expense
- C. Posting only one side of a transaction
- D. A credit entry posted as a debit
- **Answer:** B. Classifying a capital item as a revenue expense
39. **If a trial balance totals do not agree, what is the first step to locate the error?**
- A. Check each ledger account balance for accuracy
- B. Redo the final accounts
- C. Prepare a new trial balance from scratch
- D. Check for compensating errors
- **Answer:** A. Check each ledger account balance for accuracy
40. **If a company’s purchases are undercast by ₹800, what is the correction entry?**
- A. Debit Suspense Account, ₹800
- B. Credit Purchases Account, ₹800
- C. Debit Purchases Account, ₹800
- D. No correction needed
- **Answer:** C. Debit Purchases Account, ₹800
41. **A trial balance can help identify which of the following errors?**
- A. Error of omission
- B. Error of transposition
- C. Error of principle
- D. Compensating error
- **Answer:** B. Error of transposition
42. **When two different errors cancel each other’s effects in the accounts, it is known as:**
- A. Complete omission
- B. Compensating error
- C. Error of commission
- D. Principle error
- **Answer:** B. Compensating error
43. **An expense that is incorrectly recorded as an asset is an example of:**
- A. Compensating error
- B. Error of principle
- C. Error of omission
- D. Error of commission
- **Answer:** B. Error of principle
44. **Which of the following statements about the suspense account is TRUE?**
- A. It can only be used for cash errors
- B. It is used when a trial balance does not tally
- C. It can only have a debit balance
- D. It is required for preparing financial statements
- **Answer:** B. It is used when a trial balance does not tally
45. **If a transaction is completely left out from the books, it is referred to as:**
- A. Error of commission
- B. Compensating error
- C. Complete omission
- D. Principle error
- **Answer:** C. Complete omission
46. **Which type of error is identified by a difference divisible by 2 in the trial balance totals?**
- A. Compensating error
- B. Error of principle
- C. Transposition error
- D. Posting to the wrong side
- **Answer:** D. Posting to the wrong side
47. **If a sales return of ₹500 is recorded in the purchases return book, it is an example of:**
- A. Error of omission
- B. Error of principle
- C. Error of commission
- D. Compensating error
- **Answer:** B. Error of principle
48. **Which error requires a journal entry for its rectification?**
- A. Transposition error
- B. Error of omission in a single account
- C. Complete omission in both accounts
- D. Error of principle
- **Answer:** D. Error of principle
49. **When a trial balance totals differ by an amount divisible by 9, it may indicate:**
- A. Error of principle
- B. Error of omission
- C. Compensating error
- D. Transposition error
- **Answer:** D. Transposition error
50. **The double-entry system of accounting is based on which principle?**
- A. Every debit has a credit and vice versa
- B. Only credit entries are recorded in the journal
- C. All cash flows are recorded as expenses
- D. Trial balances always match on first attempt
- **Answer:** A. Every debit has a credit and vice versa
51. **A purchase of machinery recorded as purchases is an example of which error?**
- A. Error of commission
- B. Error of principle
- C. Compensating error
- D. Transposition error
- **Answer:** B. Error of principle
52. **Which of the following errors will NOT be highlighted by a trial balance?**
- A. Posting a debit as a credit
- B. Omission of a transaction in both sides
- C. Transposition error
- D. Entering a wrong amount in both debit and credit
- **Answer:** B. Omission of a transaction in both sides
53. **When a credit entry is posted on the debit side, the result is typically a:**
- A. Compensating error
- B. Transposition error
- C. One-sided error
- D. Principle error
- **Answer:** C. One-sided error
54. **If an amount posted is divided incorrectly between two accounts, this is called:**
- A. Error of commission
- B. Error of principle
- C. Compensating error
- D. Partial omission
- **Answer:** D. Partial omission
55. **Which of the following statements about rectifying errors is correct?**
- A. All errors need a suspense account for rectification
- B. Only one-sided errors need rectification
- C. Errors of omission always require journal entries
- D. Only two-sided errors require a journal entry
- **Answer:** D. Only two-sided errors require a journal entry
