CMA Foundation · Fundamentals of Financial and Cost Accounting · Trial Balance
Which statement best describes why an agreed trial balance is not conclusive proof of accuracy of the books?
An agreed trial balance only shows that total debits equal total credits, which is arithmetical accuracy. It does not prove that every transaction was recorded, posted to the right account, or classified properly, since omission, principle, commission and compensating errors can still exist.
- AIt proves only arithmetical equality of total debits and credits, not correct recording of every transactionCorrect
- BIt proves that all transactions were entered in the correct accounts and amounts
- CIt proves that closing stock has been valued correctly
- DIt proves that no compensating errors exist in the ledger
Explanation
A trial balance rests on the double-entry rule that debits equal credits, so it checks only arithmetical accuracy. Errors of omission, principle, commission and compensating errors can all remain. The other statements claim more than the statement can prove.
Did you get it right without looking?
One question tells you little. A timed set on Trial Balance shows your real accuracy, how long you take and where you lose marks.
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