Journal, Ledger, and Trial Balance (Errors and Rectification Basics) Questions

Question 1

Define journal.

Accepted Answer

Journal is the book of original entry in which business transactions are recorded for the first time in chronological order.

Question 2

Define ledger.

Accepted Answer

Ledger is the principal book of accounts in which transactions are classified and posted into individual accounts.

Question 3

What is posting?

Accepted Answer

Posting is the process of transferring journal entries to the respective ledger accounts.

Question 4

Define trial balance.

Accepted Answer

Trial balance is a statement showing debit and credit balances of ledger accounts on a particular date.

Question 5

What is an error of omission?

Accepted Answer

Error of omission occurs when a transaction is not recorded wholly or partially in the books of accounts.

Question 6

What is suspense account?

Accepted Answer

Suspense account is a temporary account opened to record the difference when trial balance does not agree until errors are rectified.

Question 7

Explain objectives of trial balance.

Accepted Answer

Trial balance is prepared mainly to ensure arithmetical accuracy of the ledger and to support preparation of final accounts. Its main objectives are: (i) to check that total debit balances equal total credit balances, which indicates that posting and casting are arithmetically correct; (ii) to provide a summary of ledger balances at one place so that accounts can be reviewed quickly; (iii) to act as a base document for preparing Trading Account, Profit & Loss Account and Balance Sheet; and (iv) to help in locating errors because disagreement in totals signals mistakes in recording/posting/balancing.

Question 8

Differentiate between journal and ledger.

Accepted Answer

Journal and ledger are two basic books of accounts, but they serve different purposes. Journal is the book of original entry where transactions are recorded first in chronological order with debit and credit accounts and narration. Ledger is the principal book where journal entries are posted account-wise, so all transactions relating to a particular account are collected in one place and the balance of each account can be determined. In short: journal answers *what happened and when* (date-wise), while ledger answers *how much in each account* (account-wise) and forms the basis for trial balance and final accounts.

Question 9

Explain error of principle with example.

Accepted Answer

An error of principle occurs when a transaction is recorded by violating a fundamental accounting principle, usually by wrong classification between capital and revenue items. Such an error may not affect the agreement of trial balance, but it affects profit and the balance sheet. Example: purchase of machinery (a capital expenditure) wrongly debited to Purchases A/c (a revenue item). This overstates expenses and understates fixed assets, leading to wrong profit and wrong financial position.

Question 10

Write a short note on suspense account.

Accepted Answer

Suspense account is a temporary account opened when the trial balance does not agree and the difference cannot be immediately located. The difference is placed in suspense account to enable the preparation of final accounts without delay. When errors are subsequently found, rectification entries are passed; one-sided errors are adjusted through the suspense account. After all such errors are rectified, the suspense account should close (balance becomes nil).

Question 11

Rectify: Sales book total ₹9,500 posted to Sales A/c as ₹9,050 (after trial balance).

Accepted Answer

Sales A/c has been short credited by ₹450 (₹9,500 − ₹9,050). Since trial balance was prepared, the difference would have gone to suspense account. Rectification entry is:

Suspense A/c Dr. ₹450
	To Sales A/c ₹450

Question 12

Rectify: Rent paid ₹800 not recorded anywhere (after trial balance).

Accepted Answer

This is a complete omission (no debit and no credit were recorded). Since both sides were omitted, it does not involve suspense account. Rectification entry is:

Rent A/c Dr. ₹800
	To Cash A/c ₹800

Question 13

Explain journal and ledger and describe posting with an example.

Accepted Answer

### Journal
Journal is the book of original entry in which transactions are recorded first in chronological order. Each entry shows the debit and credit accounts, amount, and narration. Journal provides a systematic and dated record of all transactions.

### Ledger
Ledger is the principal book of accounts. It contains separate accounts for each item such as Cash, Purchases, Sales, Rent, Debtors, Creditors, etc. The purpose of ledger is classification—bringing together all transactions of a similar nature in one account so that the balance of that account can be found.

### Posting (process)
Posting means transferring the journal entry information to ledger accounts. The debit account in the journal is posted on the debit side of that ledger account, and the credit account in the journal is posted on the credit side of that ledger account (with cross-references).

**Example:** Rent paid ₹2,000
Journal entry: Rent A/c Dr. ₹2,000
	To Cash A/c ₹2,000
Posting:
- Rent A/c is debited ₹2,000 in the ledger (because rent expense increases).
- Cash A/c is credited ₹2,000 in the ledger (because cash decreases).

Thus, journal provides the first record and ledger provides account-wise classification for preparing trial balance and final accounts.

Question 14

Classify errors in accounting and explain which errors affect trial balance.

Accepted Answer

Errors in accounting may be classified as: (i) errors of omission, (ii) errors of commission, (iii) errors of principle, and (iv) compensating errors.

**Errors that generally do not affect trial balance agreement** include complete omission (both debit and credit omitted), errors of principle (wrong account but debit and credit totals still equal), and compensating errors (two errors offset each other).

**Errors that generally affect trial balance agreement** are those that create one-sided differences, such as wrong casting of books, wrong balancing of accounts, posting to the wrong side, partial omission (only one aspect recorded), or posting wrong amounts on one side. Such errors disturb equality of debit and credit totals and cause disagreement.

Question 15

Explain rectification of errors after trial balance and the role of suspense account.

Accepted Answer

After a trial balance is prepared, errors are rectified by passing journal entries (rectification entries). If the trial balance had agreed, rectification often involves adjusting the wrong accounts by debiting and crediting the correct accounts. If the trial balance had not agreed, a suspense account is opened with the difference to temporarily balance the trial balance.

For one-sided errors that caused the difference, suspense account is used in the rectification entry (debited or credited as required). For two-sided errors (where both debit and credit were wrong but equal), suspense account is not involved.

As errors are found and rectified, the balance in suspense account reduces. When all errors responsible for the difference are corrected, suspense account closes (balance becomes zero).

Journal, Ledger, and Trial Balance (Errors and Rectification Basics)

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