ACCA Applied Knowledge · Financial Accounting · Trial balance
A trial balance was extracted and balanced. The following errors were later found: (1) a $600 payment of rent was debited to the electricity account; (2) a credit sale of $900 was completely omitted from the books. How many of these errors affect profit for the year?
Only the omitted credit sale affects profit, because it understates sales revenue by $900. The rent debited to electricity merely moves cost between two expense accounts, leaving total expenses and profit unchanged. Neither error would show up as a trial balance difference.
- ANeither error
- BError (1) only
- CError (2) onlyCorrect
- DBoth errors
Explanation
Rent and electricity are both expenses, so moving $600 between them leaves total expenses and profit unchanged (error of commission). Omitting the sale of $900 understates both sales and receivables, so profit is understated by $900. Only error (2) affects profit, and neither would be revealed by the trial balance.
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