Question

The ________ is helpful in preventing classification errors if it accurately describes which type of transaction should be in each account.

A) general ledger
B) general journal
C) trial balance
D) chart of accounts

Answer 1

The chart of accounts is key in preventing classification errors by categorizing every transaction a business records, which leads to accurate financial reporting and management.

Step-by-step explanation:

The chart of accounts is helpful in preventing classification errors if it accurately describes which type of transaction should be in each account. The chart of accounts is a systematic list of all the account titles and numbers being used by an organization to track the financial transactions and prepare financial statements. Each account in the chart of accounts has a specific purpose and is used to categorize every transaction that a business records. By properly defining and using the chart of accounts, businesses can ensure that transactions are recorded in the correct accounts, facilitating accurate financial reporting and effective financial management.

By having a well-defined chart of accounts, it becomes easier to assign the correct account to each transaction, reducing the risk of classification errors.