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Chapter 3: Question 6Q (page 127)

Is it necessary that a trial balance be taken periodically? What purpose does it serve?

Short Answer

Expert verified

Yes, it is necessary to prepare the trial balance periodically. The main purpose of preparing a trial balance is to verify whether the entries made in the company's bookkeeping system are mathematically accurate.

Step by step solution

01

Meaning of trial balance

A trial balance is a statement that depicts the sum total of debits and credits of all the ledger accounts with the purpose of checking the arithmetical accuracy of books of accounts.

02

Purpose of preparing a trial balance periodically

The necessity of preparing trial balance is as follows:

  • It examines the correctness of the entries made; it justifies that the debit and credit balances are equal in the ledger.
  • It supplies a list of ledger balances and their accounts which is beneficial for the preparation of financial statements and for the supply of accounting data of the business.

Therefore, the preparation of trial balance periodically is of great importance for the concern.

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Most popular questions from this chapter

Selected accounts of Urdu Company are shown below.

Supplies

Beg. Bal

800

10 鈦� 31

470

Salaries and Wages Expense

10 鈦� 15

800

10 鈦� 31

600

Unearned Service Revenue

10 鈦� 31

400

10 鈦� 20

650

Service Revenue

10 鈦� 17

2,400

10 鈦� 31

1,650

10 鈦� 31

400

Accounts Receivable

10 鈦� 17

2,400

10 鈦� 31

1,650

Salaries and Wages Payable

10 鈦� 31

600

Supplies Expense

10 鈦� 31

470

Instructions

From an analysis of the T-accounts, reconstruct

(a) the October transaction entries, and

(b) the adjusting journal entries that were made on October 31, 2017. Prepare explanations for each journal entry

Jurassic Park Co. prepares monthly financial statements from a worksheet. Selected portions of the January worksheet showed the following data.

JURASSIC PARK CO.

Worksheet (PARTIAL)

For The Month Ended Jan. 31, 2017



Trial Balance
Adjustment
Adjusted
trial balance

Account Titles

Dr.

Cr.

Dr.

Cr.

Dr.

Cr.

Supplies

3,256

a) 1,500

1,756

Accumulated Depreciation鈥擡quipment

6,682

(b) 257

6,939

Interest Payable

(c) 50

150

Supplies Expense

(a) 1,500

1,500

Depreciation Expense

(b) 257

257

Interest Expense

(c) 50

50

During February, no events occurred that affected these accounts. But at the end of February, the following information was available.

  1. Supplies on hand \(715
  2. Monthly depreciation \)257
  3. Accrued interest $ 50

Instructions

Reproduce the data that would appear in the February worksheet, and indicate the amounts that would be shown in the February income statement.

What are adjusting entries and why are they necessary?

E3-8 (L03) EXCEL (Adjusting Entries) Andy Roddick is the new owner of Ace Computer Services. At the end of August2017, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information relatedto unrecorded expenses that the business incurred during August.1. At August 31, Roddick owed his employees \(1,900 in wages that will be paid on September 1.2. At the end of the month, he had not yet received the month鈥檚 utility bill. Based on past experience, he estimated the billwould be approximately \)600.3. On August 1, Roddick borrowed \(30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%.4. A telephone bill in the amount of \)117 covering August charges is unpaid at August 31.InstructionsPrepare the adjusting journal entries as of August 31, 2017, suggested by the information above.

Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.) Aug. 2 Invested \(12,000 cash and \)2,500 of equipment in the business. 7 Purchased supplies on account for \(500. (Debit asset account.) 12 Performed services for clients, for which \)1,300 was collected in cash and \(670 was billed to the clients. 15 Paid August rent \)600. 19 Counted supplies and determined that only $270 of the supplies purchased on August 7 are still on hand.
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