CA Foundation · Accounting · Accounts from Incomplete Records
Because a trader following the single entry system does not record the dual aspect of each transaction, which of the following is a direct limitation?
The main limitation is that the arithmetical accuracy of the books cannot be verified by a Trial Balance, because the dual aspect of transactions is not recorded. Errors can therefore stay hidden, although capital can still be computed through a Statement of Affairs.
- ACash book cannot be maintained
- BArithmetical accuracy of the books cannot be tested by a Trial BalanceCorrect
- CDebtors can never be identified
- DCapital of the trader cannot be computed in any way
Explanation
Without equal debits and credits, a Trial Balance does not agree-check the books, so errors may remain undetected. Cash book and personal accounts are usually kept. Capital can still be found through a Statement of Affairs, so the last option is wrong.
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