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Questions and Answers
What is the purpose of preparing a Trial Balance?
What is the purpose of preparing a Trial Balance?
- To prove the arithmetical accuracy of the Books of Accounts (correct)
- To determine the net profit of the business
- To record all ledger accounts at the end of the financial year
- To calculate the total assets of the business
Which type of Trial Balance shows only the balances of each ledger account?
Which type of Trial Balance shows only the balances of each ledger account?
- Credit Trial Balance
- Net Trial Balance (correct)
- Debit Trial Balance
- Gross Trial Balance
Why is Gross Trial Balance not in common use?
Why is Gross Trial Balance not in common use?
- Because it does not show the arithmetical accuracy of Books of Accounts
- Because it does not disclose the balance of each account (correct)
- Because it proves the net profit of the business
- Because it includes all ledger accounts
What is recorded in the credit amount column in Net Trial Balance?
What is recorded in the credit amount column in Net Trial Balance?
In what book are all cash and bank transactions recorded?
In what book are all cash and bank transactions recorded?
When is a Trial Balance usually prepared?
When is a Trial Balance usually prepared?
Which side of the Cash Book is also known as the Debit side?
Which side of the Cash Book is also known as the Debit side?
What is the dual purpose of the Cash Book?
What is the dual purpose of the Cash Book?
In a two column Cash Book with Cash and Bank columns, what does the Bank column represent?
In a two column Cash Book with Cash and Bank columns, what does the Bank column represent?
When are contra entries recorded in the Cash Book?
When are contra entries recorded in the Cash Book?
What does the letter 'C' in the Ledger Folio column denote in the Cash Book?
What does the letter 'C' in the Ledger Folio column denote in the Cash Book?
In large business organizations, what is the purpose of the Petty Cash Book?
In large business organizations, what is the purpose of the Petty Cash Book?
What role does the Bank play in providing services to traders?
What role does the Bank play in providing services to traders?
What happens when a trader opens a Current Account with the bank?
What happens when a trader opens a Current Account with the bank?
Under what circumstances does a trader open a Current Account with the bank?
Under what circumstances does a trader open a Current Account with the bank?
What types of transactions affect both Cash Account and Bank Account simultaneously?
What types of transactions affect both Cash Account and Bank Account simultaneously?
What is the primary purpose of a cashbook?
What is the primary purpose of a cashbook?
How are cash sales recorded in the cashbook?
How are cash sales recorded in the cashbook?
What does cashbook management involve?
What does cashbook management involve?
What is the purpose of reconciling the cashbook with the bank statement?
What is the purpose of reconciling the cashbook with the bank statement?
How are bank withdrawals recorded in the cashbook?
How are bank withdrawals recorded in the cashbook?
What does the term 'cash inflow' generally refer to in the context of the cashbook?
What does the term 'cash inflow' generally refer to in the context of the cashbook?
What is the primary purpose of a petty cashbook?
What is the primary purpose of a petty cashbook?
In petty cash management, what is the purpose of reconciling the petty cashbook with the actual petty cash at regular intervals?
In petty cash management, what is the purpose of reconciling the petty cashbook with the actual petty cash at regular intervals?
What is the purpose of preparing a trial balance?
What is the purpose of preparing a trial balance?
What does trial balance preparation involve?
What does trial balance preparation involve?
What is the main purpose of a cashbook?
What is the main purpose of a cashbook?
What distinguishes a petty cashbook from a regular cashbook?
What distinguishes a petty cashbook from a regular cashbook?
What is the purpose of reconciling the petty cashbook with actual petty cash?
What is the purpose of reconciling the petty cashbook with actual petty cash?
What distinguishes trial balance preparation from petty cash management?
What distinguishes trial balance preparation from petty cash management?
What is the primary focus of trial balance preparation?
What is the primary focus of trial balance preparation?
Study Notes
Trial Balance Preparation
- The purpose of preparing a Trial Balance is to ensure the accuracy of ledger accounts and detect any errors.
- A Balance Trial Balance shows only the balances of each ledger account.
Cash Book and Bank Transactions
- All cash and bank transactions are recorded in the Cash Book.
- The left side of the Cash Book is also known as the Debit side.
- The dual purpose of the Cash Book is to record both cash and bank transactions.
- In a two-column Cash Book, the Bank column represents bank transactions.
- Contra entries are recorded in the Cash Book when there is a transfer between cash and bank accounts.
Petty Cash Book
- In large business organizations, the Petty Cash Book is used to record small expenses.
- The primary purpose of a petty cashbook is to manage and record small expenses.
Cashbook Management
- Cash sales are recorded on the debit side of the Cash Book.
- Cashbook management involves recording, classifying, and reporting cash transactions.
- The primary purpose of a cashbook is to record, classify, and report cash transactions.
- Bank withdrawals are recorded on the credit side of the Cash Book.
- Cash inflow refers to the receipt of cash or cheques from customers.
Reconciliations
- Reconciling the cashbook with the bank statement ensures accuracy and detects any discrepancies.
- Reconciling the petty cashbook with actual petty cash ensures accuracy and detects any discrepancies.
Petty Cash Management
- Petty cash management involves recording, classifying, and reporting small expenses.
- The purpose of reconciling the petty cashbook with actual petty cash is to ensure accuracy and detect any discrepancies.
Trial Balance vs Petty Cash Management
- Trial balance preparation involves checking the accuracy of ledger accounts, whereas petty cash management involves managing and recording small expenses.
- The primary focus of trial balance preparation is to ensure the accuracy of ledger accounts.
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Description
Learn about the trial balance in accounting, which is an abstract or list of all ledger accounts showing debit and credit balances as of a specific date. Understand its importance in ascertaining the arithmetical accuracy of books of accounts and its types, such as gross trial balance and net trial balance.
