Chapter 3 (Part 1) Preparation of Trial Balance.pdf

Preparation of trial balance

1. CHAPTER 3
(PART 1)
THE TRIAL
BALANCE

2. LEARNING OUTCOMES
Students able to briefly explain the meaning of a
trial balance.
Students able to briefly explain the main
purposes of preparing a trial balance.
Students able to prepare the trial balance
correctly.

3. WHAT IS A TRIAL BALANCE ?
Definition: A list of account balances in the
ledger at a certain date.

4. EXAMPLE OF A TRIAL BALANCE
Hocus Pocus Enterprise
Trial balance at 31 December 2015
Dr Cr
Sales 20 000
Purchases 15 000
Wages 3 000
Lighting and heating 500
Rental paid 600
Inventory 400
Trade receivable 1 000
Bank 500
Trade payable 500
Capital 500
21 000 21 000
Business name
Title of list
Account names

5. PURPOSESOFTHETRIALBALANCE
To check arithmetical accuracyof the accounts.
To be used as a basis for preparation of final
accounts.

6. PREPARINGATRIALBALANCE
Determine the account balance for each T-
Account.
A trial balanceis a list of all accounts and their
balances.
It provides a means to assure that the total
debits equal total credits.

7. ADARSH'S LEDGER
Bank account
Sept 1Capital 90,000 Sept 2Rent paid 400
27Vinod 2,890
30Balance c/d 86,710
90,000 90,000
Oct 1Balance b/d 86,710
Capital account
Sept 1Bank 90,000
Rent paid account
Sept 2Bank 400

8. Vinod account
Sept 21Purchases returns 110 Sept 4Purchases 2,100
27Bank 2,890 14Purchases 900
3,000 3,000
Purchases account
Sept 4Vinod 2,100 Sept 29Drawings 130
14Vinod 900 30Balance c/d 2,870
3,000 3,000
Oct 1Balance b/d 2,870
Purchases returns account
Sept 21Vinod 110

9. Cash account
Sept 8Sales 170 Sept 11Sundry expenses 32
25Wages 120
30Balance c/d 18
170 170
Oct 1Balance b/d 18
Sales account
Sept 30Balance c/d 550 Sept 8Cash 170
19Kaveri 380
550 550
Oct 1Balance b/d 550
Sundry Expenses account
Sept 11Cash 32

10. Kaveri account
Sept 19Sales 380
Wages account
Sept 25Cash 120
Drawings account
Sept 29Purchases 130

11. ADARSH
Trial Balance at 30 September 20-3
Dr Cr
Bank 86,710
Capital 90,000
Rent paid 400
Purchases 2,870
Purchases returns 110
Cash 18
Sales 550
Sundry expenses 32
Kaveri 380
Wages 120
Drawings 130
90,660 90,660

12. REMEMBERING NORMAL BALANCES
D E A D C L I C
D
E
A
D
EXPENSES
DRAWINGS
ASSETS
DEBIT C
L
I
C
CREDIT
LIABILITIES
INCOME
CAPITAL

13. REFLECTION
What are the two (2) main purposes of a trial
balance ?
How to distinguish between accounts which
have debit balances and those which have
credit balances ?