The following are account balances for the medical practice of Pierre Laswai,MD,for October 2016.Capital 30,000Accounts payable 6,000Equipment 29,000Service revenue 23,000Drawings 6,000Insurance expense 3,500Cash 11,000Utilities expense 700Supplies 2,800Salaries and wages expense 9,000Accounts receivable 10,000Rent expense 2,000Required:i. Prepare the trial balance as at October 31, 2016. (3 marks)ii. Indicate reasons why a trial balance may not balance. (3 marks)iii. Identify three types of errors that can remain in a balanced trial balance.(3 marks
Question
The following are account balances for the medical practice of Pierre Laswai,MD,for October 2016.Capital 30,000Accounts payable 6,000Equipment 29,000Service revenue 23,000Drawings 6,000Insurance expense 3,500Cash 11,000Utilities expense 700Supplies 2,800Salaries and wages expense 9,000Accounts receivable 10,000Rent expense 2,000Required:i. Prepare the trial balance as at October 31, 2016. (3 marks)ii. Indicate reasons why a trial balance may not balance. (3 marks)iii. Identify three types of errors that can remain in a balanced trial balance.(3 marks
Solution
i. The trial balance as at October 31, 2016 would be prepared as follows:
Debit Side: Equipment: 6,000 Insurance Expense: 11,000 Utilities Expense: 2,800 Salaries and Wages Expense: 10,000 Rent Expense: 74,000
Credit Side: Capital: 6,000 Service Revenue: 59,000
The trial balance does not balance because the total debits (59,000).
ii. Reasons why a trial balance may not balance include:
- Errors in addition or subtraction
- Posting the same transaction more than once
- Posting a debit as a credit or vice versa
- Omitting a transaction entirely
iii. Three types of errors that can remain in a balanced trial balance include:
- Errors of omission: A transaction that is completely omitted from the books will not affect the trial balance.
- Errors of commission: If an incorrect amount is entered on both the debit and credit sides of a transaction, the trial balance will still balance.
- Compensating errors: If two or more errors are made that amount to the same value on opposite sides of the trial balance, the trial balance will still balance.
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