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Accounting (Text Only)
Trial balance errors
For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.
a. The payment of an insurance premium of $5,400 for a three-year policy was debited to Prepaid Insurance for $5,400 and credited to Cash for $4,500.
b. A payment of $270 on account was debited to Accounts Payable for $720 and credited to Cash for $720.
c. A purchase of supplies on account for $1,600 was debited to Supplies for 51,600 and debited to Accounts Payable for $1,600.
(a)
Trial balance:
A trial balance is the summary of all the ledger accounts. The trial balance is prepared to check the total balance of the debit column with the total of the balance of the credit column, which must be equal. The trial balance is usually prepared to check accuracy of ledger balances, and before the preparation of financial statements.
To indicate: The errors made would cause the trial balance totals to be unequal, and whether their balance gets higher, and by how much.
The trial balance totals are unequal, since the amount posted to credit column is incorrect. Thereby, the debit total gets higher by $900
(b)
To indicate: The errors made would cause the trial balance totals to be unequal, and whether their balance gets higher, and by how much.
(c)
To indicate: The errors made would cause the trial balance totals to be unequal, and whether their balance gets higher, and by how much.
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