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Questions and Answers
Which of the following best describes a trial balance?
Which of the following best describes a trial balance?
- A financial statement that shows the profit or loss of a company
- A report that summarizes the cash inflows and outflows of a business
- A document that lists all the accounts and their balances at a specific point in time (correct)
- A record of all the transactions made by a company during a specific period
What is the purpose of a trial balance?
What is the purpose of a trial balance?
- To calculate the net income of a company
- To determine the cash flow of a business
- To prepare financial statements
- To check the accuracy of the accounting records (correct)
When is a trial balance prepared?
When is a trial balance prepared?
- Throughout the accounting period
- At the end of an accounting period (correct)
- Only when requested by auditors
- At the beginning of an accounting period
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Study Notes
Trial Balance Overview
- A trial balance is a list of all general ledger accounts and their corresponding debit or credit balances.
Purpose of a Trial Balance
- The purpose of a trial balance is to ensure the debit and credit columns are equal, confirming that the accounting equation (Assets = Liabilities + Equity) is in balance.
Preparation of a Trial Balance
- A trial balance is typically prepared at the end of an accounting period, such as at the end of a month, quarter, or year, to prepare financial statements.
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