Accounting Errors and Corrections Quiz

This error happens when a transaction is entirely left out of the accounting records.

The balance sheet provides a snapshot of a company's financial position at a specific moment.

An error of omission happens when a transaction is entirely left out of the accounting records.

An error of principle occurs when an incorrect accounting principle is applied, leading to misstatements.

The going concern principle requires financial statements to be prepared assuming the business will continue its operations.

To correct an overstatement of revenue, Retained Earnings should be debited, and Revenue should be credited.

An error of transposition could be present if the trial balance does not balance, where digits are inadvertently swapped.

This principle highlights that financial statements should focus on the economic reality of transactions rather than just their legal form.

An error of commission occurs when a transaction is recorded incorrectly.

Objectivity principle states that accounting information should be backed by evidence and free from bias.

A contra account holds a balance opposite to its related account, like Accumulated Depreciation.

A suspense account is used to hold uncertain transactions temporarily until they are properly identified and recorded.

An error in double-entry accounting will cause the trial balance to fail to balance.

Amortization refers to spreading out the cost of an intangible asset over its useful life.

A contra liability account is used to offset a liability account, reducing its balance.

The going concern concept assumes that a business will continue its operations indefinitely.

The trial balance is used to identify errors in the financial statements by ensuring debits equal credits.