NIOS Class 10 Accountancy Chapter 11 Trial Balance and Accounting Errors

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NIOS Class 10 Accountancy Chapter 11 Trial Balance and Accounting Errors

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Also, you can read the NIOS book online in these sections Solutions by Expert Teachers as per National Institute of Open Schooling (NIOS) Book guidelines. These solutions are part of NIOS All Subject Solutions. Here we have given NIOS Class 10 Accountancy Chapter 11 Trial Balance and Accounting Errors, NIOS Secondary Course Accountancy Solutions for All Chapters, You can practice these here.

Trial Balance and Accounting Errors

Chapter: 11

Intext Questions 11.1

Given below are some statements. Some of these statements are correct and some of these statements are incorrect. Write ‘correct’ if the statement is correct and ‘incorrect’ if it is not correct. 

(i) Trial Balance is an essential part of the accounting process. 

Ans: Correct.

(ii) Trial Balance is prepared only once in a year. 

Ans: Incorrect.

(iii) If the totals of the two columns of a Trial Balance are equal it means the posting has been done correctly. 

Ans: Incorrect.

(iv) Debit Balances of the accounts are written in the Debit column and Credit balances in the credit column of the Trial Balance. 

Ans: Correct.

(v) The Assets and Expenses accounts have the credit balance.

Ans: Incorrect.

Intext Questions 11.2

Fill in the blanks with suitable words or words: 

(i) Trial Balance is said to have agreed when its _________ are equal. 

Ans: Debit and Credit totals.

(ii) The agreement of Trial Balance is a proof of __________ accuracy of the ledger posting. 

Ans: Arithmetic.

(iii) There is a ___________ column and a _________ column for balances of accounts in a Trial Balance. 

Ans: Debit and credit.

(iv) Cash in hand is written in the _________ column of the Trial Balance.

Ans: Debit.

Intext Questions 11.3

Few errors have been committed in the books of Ram. State with reasons which errors would affect the trial balance. 

(i) Sales Rs. 2500 to Shyam omitted from being recording in the books of accounts. 

Ans: We Will Update the Answer Very Soon.

(ii) Purchase journal was overcast by Rs. 2000. 

Ans: We Will Update the Answer Very Soon.

(iii) Sales journal was under cast by Rs. 3000 

Ans: We Will Update the Answer Very Soon.

(iv) Amount paid to Anil wrongly posted to the debit of Sunil’s account. 

Ans: We Will Update the Answer Very Soon.

(v) Bank overdraft shown in the debit column in the trial balance. 

Ans: We Will Update the Answer Very Soon.

(vi) Sales of Rs. 3000 to Rohtas entered in the sales journal as sales to Ram. 

Ans: We Will Update the Answer Very Soon.

(vii) Wages paid for installation of machines debited to wages account.

Ans: We Will Update the Answer Very Soon.

Intext Questions 11.4

I. Fill in the blanks with suitable word or words: 

(i) If there is an error in totaling the Subsidiary Day Books, the totals of Trial Balance will ______________. 

Ans: Not agree.

(ii) The Trial Balance will not agree if there is an error in carrying out _________ from ledger. 

Ans: Balance.

(iii) Agreement of Trial Balance is not a ___________ of the correctness of posting.

Ans: Proof.

(iv) When the total of the two columns of Trial Balance are not equal, the difference is put in ___________ Account to make the Trial Balance agree. 

Ans: Suspense.

II. 

(i) Which of the following errors will not affect the Trial Balance. 

(a) Wrong balancing of an account. 

(b) Writing an amount in the wrong account but on the correct side. 

(c) Wrong totaling of an account. 

(d) None of the above. 

Ans: (b) Writing an amount in the wrong account but on the correct side.

(ii) Which of the following is not the main objective of preparing A Trial Balance? 

(a) To check arithmetical accuracy. 

(b) To prepare final accounts. 

(c) To have comparative study of each account. 

(d) To present trial balance in court as a proof of transaction. 

Ans: (d) To present trial balance in court as a proof of transaction.

(iii) Which of the following errors will affect the Trial Balance? 

(a) Repairs to buildings have been debited to building account. 

(b) The total of purchases journal is Rs. 10,000 short. 

(c) Carriage paid on new machinery has been debited to the carriage account. 

(d) None of the above. 

Ans: (b) The total of purchases journal is Rs. 10,000 short.

(iv) Which of the following errors will be disclosed by Trial Balance? 

(a) Error of complete omission. 

(b) Wrong casting. 

(c) Compensating error. 

(d) Error of Principles. 

Ans: (b) Wrong casting.

(v) Which of the following errors will not be disclosed by Trial Balance? 

(a) Error of complete commission. 

(b) Posting of wrong amount. 

(c) Posting an amount twice in an account. 

(d) Posting to the wrong side of an account.

Ans: (a) Error of complete commission.

1. Why do you consider Trial Balance as a test of the arithmetical accuracy of the books of accounts? List the errors that will be disclosed by the Trial Balance.

Ans: Trial Balance is considered a test of the arithmetical accuracy of the books of accounts because it verifies whether the total debits equal the total credits in the general ledger. The fundamental principle of double-entry bookkeeping states that for every debit entry recorded, there must be a corresponding credit entry, and vice versa. Therefore, if the books of accounts are accurately recorded, the total debits and total credits should always be equal.

Errors disclosed by trial balance have been explained below:

(i) Wrong Casting: If the total of the Cash Book or some other Subsidiary Book is casted wrong, the Trial Balance will not tally. For example, the total of the Purchase book has been casted Rs. 2000 more. When this total is posted to the debit side of the purchase account, it will also show an excess debit of Rs. 2000 and hence, the Trial Balance will not agree. 

(ii) Posting to the Wrong Side of an Account: If instead of posting an amount on the debit side of an account, it is posted on the credit side, or vice versa, the Trial balance will not tally. For example, goods for Rs. 2,000 purchased from Sohan. If instead of posting the amount on the credit side of Sohan’s account it is posted to his debit, the debit side of the Trial Balance will exceed the credit side by Rs. 4,000. 

(iii) Posting of Wrong Amount: The Trial Balance will not tally if the posting in an account is made with an incorrect amount. For example, goods for Rs. 600 have been purchased from Anil. If, it has been correctly entered in the Purchase Book or purchase account, but while posting to Anil’s account, in credit side (correct side) the amount posted is Rs. 60 instead of Rs. 600, the Trial Balance will not tally. 

(iv) Omission of Posting of One aspect of a Transaction: For example, if Rs. 500 has been received from Shyam and correctly entered in the Cash Book but if it is omitted to be posted on the credit side of Shyam’s Account, the Trial Balance will not tally. 

(v) Posting an amount twice in an Account: For example Rs. 500 has received from Vinod and correctly entered in the Cash Book, but if it is posted twice on the credit side of Vinod’s account, the Trial Balance will not tally. 

(vi) Errors of Totaling and Balancing of Accounts in the Ledger: Errors may occur in the totaling of debit or credit sides of accounts in the Ledger or in the balancing of accounts in the Ledger. Because the balances of accounts are transferred to the Trial Balance, resulting in transferring wrong balances in the Trial Balance. 

2. If the Trial Balance does not tally, it means there are some errors in books of accounts. State the procedure of locating errors.

Ans: The location of errors will be easier if the following steps are systematically taken. 

(i) Check the total of the trial balance. 

(ii) Compare the ledger account balances carried to the trial balance. 

(iii) Verify the total of subsidiary books and their posting to ledger accounts. 

(iv) Verify that all journal entries have been correctly posted to the different ledger accounts. 

(v) If you find that you have an unbalanced trial balance, in other words the debits don’t equal the credits, it indicates that some errors have been committed during the course of the accounting process. Such errors have to be found and corrected. The first step in finding an error is to simply add the credit and debit columns again to verify your totals. If they still don’t agree then subtract the smaller totals from the bigger and look for the missing amount in the smaller column. If you find it, you’ve found your error. 

(vi) There are other standard techniques to track down an error in a trial balance. If the debits and credits are not equal, see if the numeral 2 divides equally the difference. If it does, look for an account, incorrectly in the column with the larger total that equals half the difference. If you find this, you’ve found your error. 

(vii) Another technique is to use the numeral 9 to find a transposition error. If the numeral 9 divides evenly the difference between the credits and debits, you have a transposition error. Go back over your credit and debit entries to try to find your transposition error.

3. State the limitations of Trial Balance.

Ans: The limitations of trial balance are as follow: 

(i) As there are certain errors which are not disclosed by a trial balance. Therefore again it can be said that the agreement of a trial balance is not a conclusive proof of the accuracy of accounts. 

(ii) A trial balance gives only condensed information of each account.

(iii) It does not give the information about the profit or loss made by the business in the accounting period. 

(iv) If trial balance is not prepared accurately, the final accounts prepared from such a trial balance would not be reliable. 

(v) It does not ensure that all the transactions have been actually recorded in the subsidiary books. 

(vi) It is prepared only by those enterprises which make use of the double entry system.

4. Is the Trial Balance a conclusive proof of the accuracy of the books of accounts? Discuss the errors not disclosed by the Trial Balance.

Ans: No, the Trial Balance is not a conclusive proof of the accuracy of the books of accounts. While it helps in detecting arithmetic errors and ensuring that total debits equal total credits, it does not guarantee the absence of all types of errors or inaccuracies in the accounting records.

The errors not disclosed by the Trial Balance are discussed below:

(i) Errors of Complete Omission: If a transaction is completely omitted from being recorded in the books of accounts, such an omission will not affect the agreement of the trial balance for example a credit purchase of Rs. 6000 from Ravi was omitted from being recorded in the Purchase Book. Because of this omission the totals of the purchases book and Ravi’s account will not be affected and hence trial balance will also not be affected. 

(ii) Errors of commission: These types of errors happen due to the negligence of accountants and cannot be located by preparing trial balance. Suppose a sales of Rs.10,000 was recorded in books as Rs.100. The balances both the accounts i.e sales accountant and cash account will be affected only by Rs. 100 and hence the trial balance will not be affected. 

(iii) Compensating Errors: Suppose, an accountant posted Rs. 500 less in the debit side of purchase account and at the same time he also posted Rs. 500 less in credit side of sales account. In this case an error has been compensated by another error. Such errors are called compensating error and will not affect the trial balance. 

(iv) Errors of principles: When an accounting principle has been violated while recording a transaction in the books of accounts, such errors are called errors of principle e.g. the purchase of an asset if recorded in the purchases account will be an error of principle but since the purchase account will be debited and the suppliers accounts will be credited with the same amount this error will not affect the trial balance.

5. Explain with examples the different types of errors that are usually committed in recording of transactions?

Ans: The different types of errors that are usually committed in recording of transactions are discussed below with example:

(i) Omission Errors: Omission errors occur when a transaction is completely left out or not recorded in the books of accounts. For example, failing to record a sale or purchase transaction can lead to understatement of revenue or expenses.

(ii) Error of Commission: Error of commission is an error that occurs when a bookkeeper or accountant records a debit or credit to the correct account but to the wrong subsidiary account or ledger.For example, money that has been received from a customer is credited properly to the accounts receivable account, but to the wrong customer.

(iii) Principle Errors: Principle errors occur when transactions are recorded using incorrect accounting principles or methods. For instance, capitalising an expense that should be expensed immediately or recording a liability as an asset are examples of principle errors.

(iv) Duplication errors: Error of duplication is when an accounting entry is duplicated, meaning it’s debited or credited twice for the same entry. For example, an expense was debited twice for the same amount would be an error of duplication.

(v) Timing Errors: Timing errors occur when transactions are recorded in the wrong accounting period. For example, recording revenue or expenses in the wrong period can distort the financial statements.

6. What do you mean by Trial Balance? Discuss the objectives of preparing a Trial Balance.

Ans: Trial Balance, defined as a statement listing, in separate columns, the debit and credit balances of all ledger accounts on a particular date. It indicates that the books of accounts have been prepared in accordance with the rules of double entry and ensures, to a great extent, the arithmetical accuracy of accounting entries. Trial Balance provides a check on arithmetical accuracy of the recording of financial transactions in different books such as journals and the ledger.

Objective of preparing a trial balance are as follow: 

(i) To check arithmetical accuracy: With the help of trial balance we can identify the arithmetical error, committed by the accountant or his assistant, because in such a situation the trial balance will not agree. Under such situations it is assumed that some errors have been committed. After identifying such errors the same are rectified. 

(ii) To prepare final accounts of the enterprise: Trial balance becomes the basis of preparing final accounts. If we do not prepare trial balance and just start preparing final accounts, it may be possible that we forget to record some transactions that were not recorded while preparing the final accounts because information about the same was not available at that time. 

(iii) Comparative study of each account: Trial balance helps in comparing the present balance of an account with the previous period balance. By preparing trial balance, we can estimate whether closing balance of accounts will increase or decrease within two accounting periods. 

(iv) To make a financial budget: Previous years trial balance figures are also helpful to estimate the future amount. In other words, we can make different financial budgets with the help of trial balance.

7. What is a Suspense Account? What does its appearance in Trial Balance indicate?

Ans: When the trial balance does not agree, because of errors committed by the accountant during the accounting process and he decides to prepare the final accounts then the difference is written on the shorter column against an account called ‘Suspense Account’.

When a Suspense Account appears in the Trial Balance, it indicates that there are unresolved discrepancies or errors in the accounting records that couldn’t be rectified before the Trial Balance was prepared. The Suspense Account is a temporary account used to temporarily hold the difference between the debit and credit sides of the Trial Balance when errors are detected but cannot be immediately identified or corrected.