Question

1)Which of the following errors would be disclosed by preparation of a trial balance? A. The collection of an account receivable was recorded by a debit to the Land account rather than to the Cash account.B. The collection of an account receivable for $219 was incorrectly recorded by a $291 debit to Cash and a $291 credit to Accounts Receivable.C. The collection of a $365 account receivable was not recorded at all.D. The collection of a $325 account receivable was recorded by a $325 debit to Cash and a $325 debit to Accounts Receivable.

2)Adjusting entries help achieve the goals of Accrual Accounting by applying the following two related accounting principles or concepts: A. Revenue Realization principle and Matching principle.B. Revenue Realization principle and Liquidity concept C. Liquidity concept and Matching principle.D. Accrual Accounting relates to the Liquidity concept only.

Answer 1

1. D. The collection of $325 account receivable was recorded by a $325 debit to cash and a $325 debit to accounts receivable.

The above entry will be disclosed by trail balance since, two debit postings were affected instead of one debit to cash and one credit to accounts receivable.

The following entries will not be discovered on preparing trail balance;

Debit of one cash account instead of another.

Posting the same wrong amount on debit and credit side.

Omitting a transaction as a whole.

2 . A. Revenue realization principle and matching principle.

The adjusting entries will see that the revenues are recognised as and when they are earned, irrespective of when they are acheived.

The matching principle sees that the expenses which helped in earning the revenues are related to each other.