9706 · 1.4.2
Trial balance flashcards
Revision flashcards for Cambridge 9706 Trial balance (syllabus 1.4.2). Flip, recall, then mark a real past-paper question.
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What is the primary purpose of a trial balance?
To check the arithmetical accuracy of the double-entry bookkeeping system by ensuring that total debit balances equal total credit balances.
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What is a suspense account?
A temporary account used to record the difference between the debit and credit totals of a trial balance, allowing it to balance while errors are located and corrected.
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Name the six types of errors NOT revealed by a trial balance.
Error of Omission, Error of Commission, Error of Principle, Error of Original Entry, Compensating Errors, and Complete Reversal of Entries.
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What types of errors ARE revealed by a trial balance?
Errors that cause debits and credits to be unequal, such as single-sided entries, unequal postings, transposition errors, and casting (addition) errors.
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What must happen to the suspense account after all corrections are made?
The suspense account balance must be cleared to zero. A remaining balance indicates that not all errors affecting the trial balance have been found.
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What is an 'error of principle'?
An error where a transaction is posted to the wrong class of account, for example, debiting a revenue expenditure (e.g., repairs) instead of a capital expenditure (e.g., machinery asset). The trial balance still balances.
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How is an error of commission corrected?
Via a journal entry that debits the correct personal account and credits the incorrect personal account (or vice versa). The suspense account is not involved as the trial balance would have balanced.
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What is the DEAD CLIC mnemonic?
A memory aid for trial balance preparation. Debits: Drawings, Expenses, Assets. Credits: Capital, Liabilities, Income.
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How does correcting an error of principle, where an asset purchase was expensed, affect profit?
It increases profit. The correction reduces expenses (by crediting the expense account) and increases assets (by debiting the asset account), leading to a higher profit figure for the period.
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What is a compensating error?
An error where two or more independent mistakes cancel each other out, leaving the trial balance in agreement. For example, an overstatement of an expense by $100 and an overstatement of income by $100.
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What is an error of complete reversal?
An error where the correct accounts are used but the debit and credit entries are swapped. For example, a cash sale is credited to cash and debited to sales. The trial balance still balances.
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A trial balance difference is divisible by 9. What error does this suggest?
A transposition error, where two digits in a number have been swapped (e.g., $72 posted as $27). The difference ($45) is divisible by 9.