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In accounting system where individual receivables and payables ledger accounts are maintained as an integral part of the double entry, which of the following errors will not be identified by a trial balance?
A) overcasting of the sales day book
B)undercasting of the analysed cash book
c)failure to transfer a non-current asset to the disposal account when sold
d)transposition error in an individual receivabales account.answer is c.
but why overcasting of the sales day book or undercasting of the analysed cash book will be identified by the trial balance?
when there is the control account and the sales day book is undercast both receivables and sales are undercast.
but when individual ledger accounts are maintained as an integral part of the double entry what happens then?
as I understood from this question TB takes the receivables(or payables) information from the control account memorandum and in that way the receivable(or payable) will be different from sales(or purchases) and it will be identified by TB and we will need a suspense account.
am I right?Hi Joseph !
Yes, when sales day book will be over-casted (and not the receivables and hence the receivables control account as per the multiple choice (a)), the trial balance (TB) will not tally and hence the error can be identified.
Under-casting the cash book (and only the cash book, not the relevant control accounts) will also lead to an untallied TB and hence the error can be identified.
The reason is that (a) and (b) are one-side errors (single-side errors). Single-side errors can be identified by the TB. These are corrected:
1. By making an adjusting entry directly in the concerned ledger account, if the correction is being made before the books are closed, or
2. By passing a journal entry debiting or crediting the concerned ledger account and crediting or debiting the suspense account, which has been simply opened for this purpose. When all the errors have been duly corrected, the suspense account will be closed (automatically).
Transposition errors (e.g. sale of $69 recorded as $96 – and hence recording the sale and cash for $96) will not be identified in the TB because they are errors of original entry. But (d) says specifically: “in an individual receivables account” and hence not the corresponding sales account, so this will be identified since this is mis-casting.
(c) is an error of omission, where a transaction is completely not recorded. The entry on disposal would be:
Dr Disposals original cost
Cr NC assets original cost
HTH
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