What are the reasons for disagreement of Trial Balance?

c) Amount Deposited Directly into the Bank by Debtors:

Answer: The debit total of trial balance should be equal to credit Sometimes the debtors deposit the amount directly to our bank a/c
total. Sometimes, they are not equal and it is assumed that there instead of paying cash to us. In such a case the bank will transfer
are some errors in books of account. Some of the reasons of errors the amount to our account and sends us an intimation of this
may be as follows: transaction. But usually, there is some delay in receiving this
information from the bank. So long the intimation is not received
1. Trial balance will disagree if a transaction is posted in by us, the cash book balance and the pass book balance will
one side of an account and omitted to post it in the disagree. For this, the cash book will show less balance and the
another side of another account. pass book will show more balance.
2. If wrong amount is posted in ledger accounts, the trial
balance will not agree. d) Income Collected by the Bank:
3. When an amount is posted wring side say in debit side
instead of credit side, the trial balance will not agree. Sometimes the bank collects and credits our account with dividend
4. Sometime, a transaction may be posted twice in the on shares, interest on govt. securities etc. as per our instructions
ledger accounts. As a result, the total of a trial balance and sends an intimation to us. But it takes a few days to receive
will not be equal. this intimation from the bank and we record it in cash book on the
5. Disagreement of a trial balance may be caused by the date of receipt of this intimation. For this, the cash book will show
wrong totaling or balancing of ledger accounts. less balance and the pass book will show more balance.
6. While totaling the figure of subsidiary books there may
arise some errors that will cause disagreement of trial
e) Interest on Deposits:
balance.
7. Omission to post a ledger balance also causes the
disagreement of a trial balance. The bank allows us interest on our deposits and credits the amount
8. If there is wrong in totaling of trial balance, a trial of interest to our account and sends intimation to us On receipt of
balance will disagree. the intimation, we record it in the cash book. So long the
information is not received by us, the cash book balance and the
9. Another cause of disagreement of a trial balance may be
pass book balance will not agree. For this, the cash book will show
the error made in carrying forward the total from one
less balance and pass book will show more balance.
page to another.
f) Expenses Paid by the Bank Directly:
What are the reasons of disagreement of cash book
and pass book balances?

Answer: Reasons of Disagreement Between Cash Book and Pass Book: Sometimes the bank pays insurance premium, factory rent, interest
a) Checks issued or drawn to creditors but not paid by bank on debentures, trade subscription etc. on our behalf as per standing
b) Checks deposited for collection but not yet collected and credited by
order. The bank debits our accounts and sends intimation to us. On
the bank
c) Amount deposited directly into the bank by debtors receipt of intimation for the bank, we record it in our cash book.
d) Income collected by the bank For this, there will be a disagreement between cash book and pass
e) Interest on deposits book.
f) Expenses paid by the bank directly
g) The bank charges g) The Bank Charges:
h) Errors and omissions
a) Checks Issued or Drawn to Creditors But Not Paid by Bank:
Our account is debited with bank charges and interest on overdraft
and intimation is sent to us by the bank. On receiving the
When a check is issued to a creditor, it is recorded on the credit
intimation from the bank, we record them in the cash book. For
side of the cash book in bank column. The bank will record it on
this the cash book will show more balance and the pass book will
the date when it is paid. In most of the cases a check cannot be
show less balance.
presented for the payment by the creditor on the date on which it
is drawn. So long the check is not presented to the bank, the cash
book balance and the pass book balance will differ. h) Errors and Omissions:

b) Checks Deposited for Collection But Not Yet Collected and In business, errors and omissions are very common. Someone may
Credited by the Bank: forget to record something or record it but in a wrong way. The
cash book balance and the pass book balance can also disagree if
there is an error or mistake in the cash book or in the pass book.
When a check is received from a debtor, it is recorded in the cash
book on the date when it is deposited with the bank for collection.
But the bank will record it in depositor's account on the ate when
it is actually collected by the bank from the concerned bank. So
long the bank cannot collect the amount, the cash book balance
and pass book balance will disagree.
Q. Explain the periodicity assumption and economic entity
assumption (June’13).

Periodicity Assumption: Transactions are recorded in the

books of accounts on the assumptions that profits are to be
ascertained for a specified period. This is known as
Periodicity Assumption of Accounting.

Economic entity assumption: In accounting, an economic

entity is one of the assumptions made in generally accepted
accounting principles. Basically, any organization or unit in
society can be an economic entity.

Examples of economic entities are hospitals, companies,

municipalities and federal agencies.

The "Economic Entity Assumption" says that the activities

of the entity are to be kept separate from the activities of its
owner and all other economic entities.