MCQ on Trial Balance - Best 41 MCQs
Test your knowledge on Trial Balance with this article of MCQ on Trial Balance with explaination of answers. This article will provide a series of multiple-choice questions to help you understand the basics of Trial Balance, a financial statement that summarizes the balances of all accounts in a company’s general ledger. With this MCQ, you can assess your understanding of the purpose, format, and significance of Trial Balance in accounting.
MCQ on Trial Balance
MCQ.1 What is a trial balance?
A. A list of all accounts with their balances
B. A list of all transactions in a period
C. A list of all financial statements
D. A list of all adjustments made to accounts
Answer: A. A trial balance is a list of all accounts in a company’s general ledger with their balances. It is used to check if the debits and credits of the accounts are balanced.
MCQ.2 What is the purpose of a trial balance?
A. To determine the financial position of the company
B. To ensure the accuracy of the accounts
C. To prepare the financial statements
D. To adjust the accounts
Answer: B. The purpose of a trial balance is to ensure the accuracy of the accounts by checking if the debits and credits are balanced.
MCQ.3 Which accounts are included in a trial balance?
A. Only balance sheet accounts
B. Only income statement accounts
C. All accounts in the general ledger
D. Only accounts with a zero balance
Answer: C. All accounts in the general ledger are included in a trial balance.
MCQ.4 When is a trial balance prepared?
A. At the end of the accounting period
B. At the beginning of the accounting period
C. Throughout the accounting period
D. Only when requested by management
Answer: A. A trial balance is prepared at the end of the accounting period.
MCQ.5 What does a debit balance in a trial balance indicate?
A. An increase in assets or a decrease in liabilities
B. A decrease in assets or an increase in liabilities
C. An increase in revenue or a decrease in expenses
D. A decrease in revenue or an increase in expenses
Answer: A. A debit balance in a trial balance indicates an increase in assets or a decrease in liabilities.
MCQ.6 What does a credit balance in a trial balance indicate?
A. A decrease in assets or an increase in liabilities
B. An increase in assets or a decrease in liabilities
C. A decrease in revenue or an increase in expenses
D. An increase in revenue or a decrease in expenses
Answer: A. A credit balance in a trial balance indicates a decrease in assets or an increase in liabilities.
MCQ.7 Which account has a debit balance?
A. Revenue
B. Expenses
C. Assets
D. Liabilities
Answer: C. Assets have a debit balance.
MCQ.8 Which account has a credit balance?
A. Revenue
B. Expenses
C. Assets
D. Liabilities
Answer: D. Liabilities have a credit balance.
MCQ.9 What is the purpose of adjusting entries?
A. To correct errors in the accounts
B. To update the accounts to reflect changes in the business
C. To prepare the financial statements
D. To close the accounts at the end of the accounting period
Answer: B. The purpose of adjusting entries is to update the accounts to reflect changes in the business, such as accruals and deferrals.
MCQ.10 When are adjusting entries made?
A. At the beginning of the accounting period
B. Throughout the accounting period
C. At the end of the accounting period
D. Only when requested by management
Answer: B. Adjusting entries are made throughout the accounting period.
MCQ.11 Which accounts are affected by adjusting entries?
A. Only revenue and expense accounts
B. Only balance sheet accounts
C. Only income statement accounts
D. Both balance sheet and income statement accounts
Answer: D. Adjusting entries can affect both balance sheet and income statement accounts.
MCQ.12 What is a prepaid expense?
A. An expense that has been incurred but not yet paid
B. An expense that has been paid in advance
C. An asset that has been acquired but not yet used
D. An asset that has been used up
Answer: Answer: B. A prepaid expense is an expense
MCQ.13 What is a trial balance?
a) A statement of all accounts in the ledger with their balances
b) A list of accounts that have not been paid
c) A summary of all transactions made during the accounting period
d) A list of all transactions made during the accounting period
Answer: a) A statement of all accounts in the ledger with their balances. A trial balance is a statement that lists all the accounts in the ledger and their balances. The purpose of the trial balance is to ensure that the total debits equal the total credits in the ledger.
MCQ.14 What is a balance sheet trial balance?
a) A trial balance that lists all the balance sheet accounts
b) A trial balance that lists all the income statement accounts
c) A trial balance that lists all the contra accounts
d) A trial balance that lists all the subsidiary accounts
Answer: a) A trial balance that lists all the balance sheet accounts. A balance sheet trial balance is a trial balance that lists all the balance sheet accounts, including assets, liabilities, and equity.
MCQ.15 What is an adjusted trial balance?
a) A trial balance that includes adjusting entries
b) A trial balance that is prepared at the end of the accounting period
c) A trial balance that is prepared before the adjusting entries
d) A trial balance that is prepared after the closing entries
Answer: a) A trial balance that includes adjusting entries. An adjusted trial balance is a trial balance that includes adjusting entries. The purpose of the adjusted trial balance is to ensure that all the accounts have been updated to reflect the adjusting entries.
MCQ.16 What is a post-closing trial balance?
a) A trial balance that is prepared before the closing entries
b) A trial balance that is prepared after the closing entries
c) A trial balance that includes only the temporary accounts
d) A trial balance that includes only the permanent accounts
Answer: d) A trial balance that includes only the permanent accounts. A post-closing trial balance is a trial balance that includes only the permanent accounts, such as assets, liabilities, and equity. The purpose of the post-closing trial balance is to ensure that the accounts have been properly closed and that the total debits equal the total credits.
MCQ.17 What is a balance sheet account?
a) An account that records revenue and expenses
b) An account that records assets, liabilities, and equity
c) An account that records temporary transactions
d) An account that records permanent transactions
Answer: b) An account that records assets, liabilities, and equity. A balance sheet account is an account that records assets, liabilities, and equity. These accounts are considered permanent accounts because they are not closed at the end of the accounting period.
MCQ.18 What is an income statement account?
a) An account that records revenue and expenses
b) An account that records assets, liabilities, and equity
c) An account that records temporary transactions
d) An account that records permanent transactions
Answer: a) An account that records revenue and expenses. An income statement account is an account that records revenue and expenses. These accounts are considered temporary accounts because they are closed at the end of the accounting period.
MCQ.19 What is a contra account?
a) An account that has a debit balance
b) An account that has a credit balance
c) An account that is used to offset another account
d) An account that is used to record revenue
Answer: c) An account that is used to offset another account. A contra account is an account that is used to offset another account. For example, a contra asset account is used to reduce the balance of an asset account.
MCQ.20 What is the purpose of the trial balance?
a) To ensure that all transactions have been recorded
b) To ensure that the total debits equal the total credits
c) To identify errors in the accounting records
d) All of the above
Answer: d) All of the above. The trial balance has multiple purposes, including ensuring that all transactions have been recorded, ensuring that the total debits equal the total credits, and identifying errors in the accounting records.
MCQ.21 What is the difference between a trial balance and a balance sheet?
a) A trial balance is a list of accounts and their balances, while a balance sheet is a financial statement that summarizes a company’s financial position.
b) A trial balance is a financial statement that summarizes a company’s financial position, while a balance sheet is a list of accounts and their balances.
c) A trial balance is used to record revenue and expenses, while a balance sheet is used to record assets, liabilities, and equity.
d) A trial balance is used to record assets, liabilities, and equity, while a balance sheet is used to record revenue and expenses.
Answer: a) A trial balance is a list of accounts and their balances, while a balance sheet is a financial statement that summarizes a company’s financial position. The trial balance is a tool used to ensure that the total debits equal the total credits in the ledger, while the balance sheet is a financial statement that summarizes a company’s financial position by showing the assets, liabilities, and equity.
MCQ.22 What is the purpose of the post-closing trial balance?
a) To ensure that the total debits equal the total credits
b) To ensure that all transactions have been recorded
c) To ensure that the accounts have been properly closed
d) To identify errors in the accounting records
Answer: c) To ensure that the accounts have been properly closed. The purpose of the post-closing trial balance is to ensure that the accounts have been properly closed and that the total debits equal the total credits. This trial balance only includes permanent accounts, which should have a zero balance after the closing entries have been made.
MCQ.23 What is the difference between an unadjusted trial balance and an adjusted trial balance?
a) An unadjusted trial balance is prepared after the adjusting entries, while an adjusted trial balance is prepared before the adjusting entries.
b) An unadjusted trial balance includes only the permanent accounts, while an adjusted trial balance includes both the permanent and temporary accounts.
c) An unadjusted trial balance does not include adjusting entries, while an adjusted trial balance includes adjusting entries.
d) An unadjusted trial balance includes only the temporary accounts, while an adjusted trial balance includes both the temporary and permanent accounts.
Answer: c) An unadjusted trial balance does not include adjusting entries, while an adjusted trial balance includes adjusting entries. The difference between an unadjusted trial balance and an adjusted trial balance is that the unadjusted trial balance does not include adjusting entries, while the adjusted trial balance includes adjusting entries. Adjusting entries are made at the end of the accounting period to ensure that the accounts reflect the company’s financial position accurately.
MCQ.24 Which of the following is an example of a balance sheet account?
a) Rent expense
b) Salaries payable
c) Accounts receivable
d) Sales revenue
Answer: c) Accounts receivable. Accounts receivable is an example of a balance sheet account because it is an asset account. Balance sheet accounts record a company’s assets, liabilities, and equity, which are not closed at the end of the accounting period.
MCQ.25 Which of the following is an example of a contra account?
a) Accumulated depreciation
b) Accounts receivable
c) Prepaid rent
d) Sales revenue
Answer: a) Accumulated depreciation. Accumulated depreciation is an example of a contra account because it is used to offset the balance of a related asset account. As the asset is depreciated, the balance of the accumulated depreciation account increases, which reduces the balance of the asset account.
MCQ.26 What is the purpose of the adjusted trial balance?
a) To ensure that all transactions have been recorded
b) To ensure that the total debits equal the total credits
c) To identify errors in the accounting records
d) To ensure that the accounts reflect the adjusting entries
Answer: d) To ensure that the accounts reflect the adjusting entries. The purpose of the adjusted trial balance is to ensure that the accounts reflect the adjusting entries made at the end of the accounting period. The adjusted trial balance lists all the accounts in the ledger, including the temporary accounts that have been adjusted.
MCQ.27 Which of the following is an example of an income statement account?
a) Equipment
b) Accounts payable
c) Cost of goods sold
d) Common stock
Answer: c) Cost of goods sold. Cost of goods sold is an example of an income statement account because it records the cost of the goods that were sold during the accounting period. Income statement accounts record a company’s revenues and expenses, which are closed at the end of the accounting period.
MCQ.28 What is the purpose of preparing a trial balance?
a) To ensure that all transactions have been recorded
b) To calculate the net income of the company
c) To calculate the balance in the cash account
d) To determine the fair value of the company’s assets
Answer: a) To ensure that all transactions have been recorded. The primary purpose of preparing a trial balance is to ensure that all transactions have been recorded accurately in the accounting records. The trial balance helps to ensure that the total debits and credits are equal and that the accounts are in balance.
MCQ.29 Which of the following accounts is not closed at the end of the accounting period?
a) Rent expense
b) Accounts payable
c) Retained earnings
d) Sales revenue
Answer: c) Retained earnings. Retained earnings is a permanent account and is not closed at the end of the accounting period. It records the company’s net income or loss over time and is used to calculate the balance in the equity section of the balance sheet.
MCQ.30 What is the difference between a temporary account and a permanent account?
a) A temporary account is used to record transactions that occur over a long period of time, while a permanent account is used to record transactions that occur over a short period of time.
b) A temporary account is closed at the end of the accounting period, while a permanent account is not closed.
c) A temporary account records a company’s assets, liabilities, and equity, while a permanent account records its revenues and expenses.
d) A temporary account records its revenues and expenses, while a permanent account records a company’s assets, liabilities, and equity.
Answer: b) A temporary account is closed at the end of the accounting period, while a permanent account is not closed. Temporary accounts are used to record revenues, expenses, and dividends during the accounting period and are closed at the end of the period. Permanent accounts, on the other hand, record the company’s assets, liabilities, and equity and are not closed at the end of the accounting period.
MCQ.31 What is the purpose of closing entries?
a) To update the accounts for the next accounting period
b) To transfer the balance in the temporary accounts to the permanent accounts
c) To correct errors in the accounting records
d) To calculate the net income or loss for the accounting period
Answer: b) To transfer the balance in the temporary accounts to the permanent accounts. The purpose of closing entries is to transfer the balance in the temporary accounts (revenues, expenses, and dividends) to the permanent accounts (assets, liabilities, and equity) at the end of the accounting period. This prepares the accounts for the next accounting period and helps to ensure the accuracy of the financial statements.
MCQ.32 Which of the following statements is true regarding the balance sheet?
a) The balance sheet reports a company’s revenues and expenses.
b) The balance sheet reports a company’s assets, liabilities, and equity.
c) The balance sheet is prepared at the end of the accounting period.
d) The balance sheet is used to calculate the net income or loss for the accounting period.
Answer: b) The balance sheet reports a company’s assets, liabilities, and equity. The balance sheet is a financial statement that reports a company’s assets, liabilities, and equity at a specific point in time. It does not report the company’s revenues and expenses or calculate the net income or loss for the accounting period.
MCQ.33 What is the purpose of a trial balance?
a) To determine the accuracy of the ledger
b) To determine the net income for the period
c) To prepare the financial statements
d) To record transactions during the accounting period
Answer: a) To determine the accuracy of the ledger. The purpose of a trial balance is to determine if the total debits equal the total credits in the ledger, which helps to ensure the accuracy of the accounting records.
MCQ.34 When is a trial balance prepared?
a) At the beginning of an accounting period
b) At the end of an accounting period
c) At the end of every month
d) At the end of every week
Answer: b) At the end of an accounting period. A trial balance is prepared at the end of an accounting period to ensure that all transactions have been recorded accurately in the accounting records.
MCQ.35 What is the correct order of preparing a trial balance?
a) List all accounts in the ledger, record the debit and credit balances, and calculate the total debits and credits
b) Calculate the total debits and credits, list all accounts in the ledger, and record the debit and credit balances
c) Record the debit and credit balances, list all accounts in the ledger, and calculate the total debits and credits
d) List all accounts in the ledger, calculate the total debits and credits, and record the debit and credit balances
Answer: d) List all accounts in the ledger, calculate the total debits and credits, and record the debit and credit balances. The correct order of preparing a trial balance is to list all accounts in the ledger, calculate the total debits and credits for each account, and record the debit and credit balances in the trial balance.
MCQ.36 What is the purpose of adjusting entries in relation to the trial balance?
a) To correct errors in the trial balance
b) To include transactions that were not recorded in the trial balance
c) To exclude transactions that were recorded in the trial balance
d) To update the account balances for accruals and deferrals
Answer: d) To update the account balances for accruals and deferrals. Adjusting entries are made to update the account balances for accruals and deferrals that have occurred during the accounting period. These adjustments are made before preparing the trial balance.
MCQ.37 If the total debits in the trial balance do not equal the total credits, what is the likely cause of the discrepancy?
a) An error in the ledger
b) An error in the financial statements
c) An error in the adjusting entries
d) An error in the closing entries
Answer: a) An error in the ledger. If the total debits in the trial balance do not equal the total credits, it is likely due to an error in the ledger, such as a transaction being recorded incorrectly or a balance being entered on the wrong side of an account.
MCQ.38 What is the correct treatment for a trial balance error that is discovered after the financial statements have been prepared?
a) Adjust the financial statements to correct the error
b) Make correcting entries in the ledger to correct the error
c) Ignore the error since the financial statements have already been issued
d) Disclose the error in the next period’s financial statements
Answer: b) Make correcting entries in the ledger to correct the error. If an error is discovered in the trial balance after the financial statements have been prepared, the correct treatment is to make correcting entries in the ledger to correct the error. This ensures that the accounting records are accurate and that the financial statements are presented fairly.
MCQ.39 What is a suspense account?
a) An account used to record correcting entries for trial balance errors
b) An account used to record transactions that have not yet been allocated to the correct account
c) An account used to record transactions that have been reversed
d) An account used to record transactions that have been accrued
Answer: a) An account used to record correcting entries for trial balance errors. A suspense account is an account used to record correcting entries for trial balance errors until the errors have been identified and corrected. Once the errors have been corrected, the entries in the suspense account are transferred to the correct accounts.
MCQ.40 Which of the following is a common error that can cause the trial balance to be out of balance?
a) Posting a transaction to the wrong side of an account
b) Recording a transaction twice
c) Failing to record a transaction
d) All of the above
Answer: d) All of the above. Posting a transaction to the wrong side of an account, recording a transaction twice, and failing to record a transaction are all common errors that can cause the trial balance to be out of balance.
MCQ.41 What is the purpose of a post-closing trial balance?
a) To ensure that all adjusting entries have been made
b) To ensure that all closing entries have been made
c) To ensure that all transactions have been recorded
d) To ensure that the financial statements are accurate
Answer: b) To ensure that all closing entries have been made. The purpose of a post-closing trial balance is to ensure that all closing entries have been made and that the ledger is ready to begin the next accounting period. It is prepared after the closing entries have been made and the financial statements have been issued.
0 Comments