Trial Balance
Meaning and Concept:
The trial balance is a statement which is prepared by using the debit and credit totals and balances of all ledger accounts with a view to ascertain the arithmetical accuracy of the recordings the financial transactions of the business. Trial balance is prepared after closing all the ledger accounts. If the two debit and credit totals of trial balance agree, it is assumed that recordings of financial transactions in the journal and ledger are arithmetically accurate. Trial balance is the base for preparing final account.
Objective of Trial Balance
- To check arithmetic accuracy: If two sides of trial balance are in agreement, it indicates that the accounting records are arithmetically accurate.
- To help in locating errors: If the two sides of trial balance are not tallied, it indicates that there are some errors committed in recording of financial transactions. So the trial balance helps to locate errors committed in accounting.
- To provide summary of ledger: Trial balance compiles the balances of various ledger accounts. So it is the summary of ledger accounts.
- To help in preparation of final account: Final accounts are prepared on the basis of ledger balances shown in trial balance.
Methods of Preparing Trial Balance:
1 Total Method 2.Balance Method
Trial Balance
As on……….
| S.No. | Account Heads | LF | Debit Rs | Credit Rs |
| Assets, Expenses, Losses Prepaid Exp. Accrued Income Opening stock Liabilities, Capital, Incomes, Gains Outstanding expenses Advance income General reserve, Fund, provision | Dr Dr Dr Dr – – – – | – – – – Cr Cr Cr Cr | ||
| Total | = | = |
Assets = Goodwill, land, building, plant and machinery, furniture, investment, stock, prepaid expenses, debtors, bills receivables, accrued income, cash in hand, cash at bank, etc.
Expenses = purchases, sales return, carriage inward, wages, factory expenses, Office expenses, selling expenses, bad debt, discount allowed, goods lost, etc.
Liabilities = creditors, loan, outstanding expenses, advance income,
Income = Sales, purchase return, interest received, commission/ discount received, bad debt recovered
Capital = capital, drawings, reserves
Examples with Solution:
Prob.2(pg.173)(Asmita): Trial Balance
As on ……
| S.No | Account Head | LF | Debit Rs | Credit Rs. |
| Rajan’s capital Opening stock Office furniture Sundry creditors Cash in hand Discount allowed Carriage inward Printing and stationary Office salaries Return outward Bills payable Rajan’s drawings Machinery Sundry debtors Cash at bank Purchases Sales Insurance Rent and taxes Return inwards Bills receivables | – 17,000 1,500 – 750 1,200 1,300 675 8,300 – – 2,000 20,000 38,000 18,200 30,000 – 800 1,100 1,000 1,700 | 41,000 45,000 925 1,600 55,000 | ||
| Total | 143,525 | 143,525 |
Prob. 3 (Asmita): Following transactions are given:
Baishak 1. Started business with cash Rs. 50,000.
5. Purchased goods for cash Rs. 20,000
10. Purchase furniture for Rs. 10,000
15. Sold goods for cash Rs. 10,000
30. Paid salary Rs. 3,000.
Req. a) Journal entries b) Necessary ledgers c) Trial balance (balance method)
Solution:
1. Cash a/c Dr 50,000 10. Furniture a/c Dr 10,00
To Capital a/c 50,000 To Cash a/c 10,000
5. Purchase a/c Dr 20,00 30. Salary a/c Dr 3,000
To Cash a/c 20,000 To Cash a/c 3,000
15. Cash a/c Dr 10,000
To Sales a/c 10,000
Dr Cash Account Cr
| Date | Particulars | JF | Amt Rs | Date | Particulars | JF | Amt. Rs |
| Bai 1 Bai 15 | To capital To Sales | 50,000 10,000 | Bai 5 Bai. 10 Bai 30 Bai 31 | By Purchase By Furniture By Salary By Balance c/d | 20,000 10,000 3,000 27,000 | ||
| 60,000 | 60,000 |
Capital Account
| Bai 31 | To balance c/d | 50,000 | Bai 1 | By Cash | 50,000 |
Furniture Account
| Bai 10 | To Cash | 10,000 | Bai 31 | By balance c/d | 10,000 |
Purchase Account
| Bai 5 | To cash | 20,000 | Bai 31 | By balance c/d | 20,000 |
Sales Account
| Bai 31 | To Balance c/d | 10,000 | Bai 15 | By cash | 10,000 |
Salary Account
| Bai 30 Jesth 1 | To Cash To balance b/d | 3,000 3000 | Bai 31 | By balance c/d | 3,000 |
Trial Balance
As on…………
| S. No | Account Heads | LF | Debit Rs | Credit Rs |
| 1. 2. 3. 4. 5. 6. | Cash Capital Furniture Purchase Sales Salary | 27,000 – 10,000 20,000 – 3,000 | 50,000 10,000 | |
| 60,000 | 60,000 |
Prob. 6(Asmita): The following transactions are given:
i) Opening balance of stock Rs. 50,000, furniture Rs. 50,000 and capital Rs 100,000
ii) Goods purchased from Shyam Rs 40,000.
iii) Goods returned to Shyam Rs. 5,000.
iv) Sold for Rs. 50,000 on cash and Rs.20,000 on credit.
v) Cash paid to Shyam Rs. 33,000 in full settlement of his account.
Req: a) Journal Entries b) Necessary Ledger c) Trial Balance (total method)
Solution:
ii) Purchase a/c Dr 40,000 iii) Shyam’s a/c Dr 5,000
To Shyam’s a/c 40,000 To Purchase Return a/c 5,000
iv) Cash a/c Dr 50,000 v) Shyam’s a/c Dr 35,000
Debtor’s a/c Dr 20,000 To cash a/c 33,000
To Sales a/c 70,000 To Discount a/c 2,000
Stock Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| To balance b/d | 50,000 |
Furniture Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| To balance b/d | 50,000 |
Capital Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| By balance b/d | 100,000 |
Purchase Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| To Shyam | 40,000 |
Shyam Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| To purchase return To cash To discout | 5,000 33,000 2000 | By Purchase | 40,000 | ||||
| 40,000 | 40,000 |
Purchase Return Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| By shyam | 5,000 |
Cash Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| To sales | 50,000 | By Shyam | 33,000 |
Debtors Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| To sales | 20,000 |
Sales Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| By Cash By Debtors | 50,000 20,000 |
Discount Account
| Date | Particulars | JF | Amt. | Date | Particulars | JF | Amt. |
| By Shyam | 2000 |
Trial Balance
As on
| S.No | Account Head | LF | Debit Rs | Credit Rs. |
| Stock Furniture Capital Purchase Shyam Purchase return Cash Debtors Sales Discount | 50,000 50,000 – 40,000 40,000 – 50,000 20,000 – – | – – 100,000 – 40,000 5,000 33,000 – 70,000 2,000 | ||
| Total | 250,000 | 250,000 |
Prob. 8.(Asmita)( HW): Following transactions of Ramesh are given:
Jan. 1. Ramesh started business with Rs. 30,000.
Jan. 3. Cash purchase Rs. 1,500.
Jan. 5. Cash sales Rs. 1,000.
Jan. 10. Paid wages Rs. 800.
Jan. 20. Received commission Rs. 400.
Req: a) Journal entries b) Necessary Ledger c) Trial balance
