Question

Please answer the following in your own words.

1. What’s is posting is and how does it help in the recording process

2. What ‘s a trial balance and its purpose

3. What are the limitations of a trial balance

4. What is the normal balance for the assets, owner’s drawings and expenses accounts

5. What is the normal balance for the liabilities, owner’s capital and revenues accounts

Answer 1

solution 1) posting in accounting is also stated as ledger posting. Posting is the process of recording amount on debit and credit side of account of each transaction. In posting , we prepare account of each item and post transactions related to that account under one head. for example , all cash transactions are posted under one head that is cash account . Posting help to record transactions under particular heads or accounts

solution 2) Trial balance is the summary of all the debit and credit balances of different accounts prepared in legder book. It helps to give summary of various accounts in one place. It serves the purpose of check clerical errors as in double entry system of accounting , every debit has its credit which means both debit side and credit side of trial should match . if there is any mismatch , it shows some clerical error which need to be checked before preparing financial statements in order to get accurate results.

solution 3) Trial balance is just the summary of various accounts. there are few limitations of trial balance are as follows.

a. There are few kind of errors which cannot be detected from trial balance such as error of ommission, error of principal, error of original entry , and compensating errors.

b) Matching of debit side and credit side of trial balance doesnot gurrantees the accuracy of information and so accurate results cannot be predicted.

c) Trial balance is only the summary of accounts , it not the statement that shows any results of profit or loss.