Multiple Choice
Which of the following accounts would normally have a credit balance on the trial balance?
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2. Transaction Analysis
Trial Balance
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Which of the following statements regarding a trial balance is true?
A
A trial balance is prepared after the financial statements are finalized.
B
A trial balance is prepared to verify that total debits equal total credits in the ledger accounts.
C
A trial balance proves that all transactions have been recorded correctly.
D
A trial balance includes only revenue and expense accounts.
Verified step by step guidance1
Step 1: Understand the purpose of a trial balance. A trial balance is a bookkeeping worksheet in which the balances of all ledger accounts are compiled into debit and credit columns to ensure that the total debits equal the total credits.
Step 2: Clarify the timing of preparation. A trial balance is typically prepared before the financial statements are finalized, not after. It serves as a preliminary check for accuracy in the ledger accounts.
Step 3: Evaluate the statement about verifying transactions. A trial balance does not prove that all transactions have been recorded correctly; it only checks the arithmetic accuracy of the ledger accounts.
Step 4: Assess the statement about account types. A trial balance includes all accounts in the ledger, not just revenue and expense accounts. This includes assets, liabilities, equity, revenue, and expenses.
Step 5: Identify the correct statement. The correct statement is: 'A trial balance is prepared to verify that total debits equal total credits in the ledger accounts.' This reflects the primary purpose of a trial balance.
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