Topic 8 trial balance

Know the Meaning, Objectives of Trial Balance.
Know the format of Trial Balance.
Preparation of Trial Balance.

1. “ TRIAL BALANCE ” By Srinivas Methuku Asst. Professor, SLS Hyderabad

2. Learning Objectives: After learning this Chapter, you will be able to: Know the Meaning, Objectives of Trial Balance . Know the format of Trial Balance. Preparation of Trial Balance.

3. What do you know about Trial Balance ?

4. INTRODUCTION AND DEFINITION: Trial balance is a list of debit and credit balances of all ledger accounts. It is prepared at the end of an accounting period. Trial balance is prepared in the statement form which shows debit balances and credit balances of all accounts in the ledger, therefore it is called as a “Statement of Balance” “ Trial balance is a statement, prepared with the debit and credit balances of ledger accounts to test the arithmetical accuracy of the books” – J.R. Batliboi .

5. INTRODUCTION AND DEFINITION: “It is a list or abstract of the balances or of total debits and total credits of accounts in a ledger, with the purpose being to determine the quality of posted debits and credits and establish a basic summary for final statements” By Eric Kohler. “ I t is schedule or list of those debit and credit balances which are extracted from various accounts in the ledger and balances of cash in hand, Cash at bank as shown by Cash Book are also included in it .” By R N Carter

6. Objectives of trial balance The objectives of preparing a trial balance are: To check the arithmetical accuracy of the ledger accounts. To locate the errors. To facilitate the preparation of final accounts.

7. Advantages of Trial Balance The advantages of the trial balance are: It helps to ascertain the arithmetical accuracy of the book-keeping work done during the period. It supplies in one place ready reference of all the balances of the ledger accounts. If any error is found out by preparing a trial balance, the same can be rectified before preparing final accounts. It is the basis on which final accounts are prepared.

8. Format of Trial Balance Trial balance of a XYZ Ltd as on…………….. Particulars / Name of the account L.F. Dr. Amount Cr. Amount Total Particulars L.F. Dr. Amount Particulars L.F. Cr. Amount Total Total

9. Points to be noted : Date on which trial balance is prepared should be mentioned at the top. Name of Account column contains the list of all ledger accounts. Ledger folio of the respective account is entered in the next column. In the debit column, debit balance of the respective account is entered. Credit balance of the respective account is written in the credit column. The last two columns are totalled at the end. A debit balance is either an asset or loss or expense; and A credit balance is either a liability or income or gain.

10. Limitations of Trial Balance Though the trial balance helps to ensure the arithmetical accuracy of the books of accounts, it is possible only when the accountant has not committed any error. As all the errors made are not disclosed by the trial balance, it would not be regarded as a conclusive proof of correctness of the books of accounts maintained.

11. Prepare Trial Balance as on 31.12.2016 from the following balances of Mr. Balan . Capital 3,40,000 Purchases 94,000 Creditors 13,000 Sales Returns 3,400 Drawings 4,000 Purchases Return 2,400 Salaries 38,200 Carriage inwards 1,400 Bill Receivable 5,800 Printing & Stationery 5,000 Bills Payable 7,000 Stock 29,900 Debtors 16,000 Machinery 50,000 Sales 1,44,000 Wages 5,000 Insurance 2,200 Rent 1,600 Land 2,50,000 Interest received 1,700 Commission received 800 Electricity charges 2,400 [Answer : Rs. 5,08,900]

12. Prepare Trial Balance as on 31.12.2012 from the following balances of Ms. Fathima . Drawings 74,800 Purchases 2,95,700 Stock (1.1.2012) 30,000 Discount received 1,000 Capital 2,50,000 Discount allowed 950 Furniture 33,000 Sales 3,35,350 Sundry creditors 75,000 Rent 72,500 Printing charges 1,500 Sundry expenses 21,000 Bank loan 1,20,000 Bills receivable 52,500 Freight 3,500 Carriage outwards 1,500 Income tax 9,500 Insurance 1,200 Machinery 2,15,400 Bills payable 31,700 [Answer : Rs. 8,13,050]

13. Prepare trial balance as on 31.3.2013 from the following balances of Mrs. Sujatha . Drawings 43,000 Purchases 2,98,000 Capital 2,12,000 Sales 3,64,000 Sundry creditors 61,500 Salaries 44,950 Bills Payable 22,000 Sales return 500 Sundry Debtors 55,000 Purchases return 2,550 Bills Receivable 72,600 Travelling expenses 12,300 Loan from Shameem 2,50,000 Commission paid 250 Furniture & Fittings 12,250 Discount earned 2,000 Opening stock 2,23,500 Cash in hand 65,450 Cash at bank 86,250 [Answer : Rs. 9,14,050]

14. Prepare a Trial balance from the following as on March 31 st , 2016. Particulars Amount Particulars Amount Stock Purchases Capital Drawings Sales Traveling Expenses Salaries Rent, Taxes & Insurance Returns Outwards Advertising Wages Bank Overdraft 60,000 1,50,000 70,000 22,000 2,50,000 1,320 11,200 5,600 2,600 840 7,000 20,000 General Trade Expenses Returns Inwards Discount allowed Interest & Commission paid Bad Debts Sundry Creditors Cash in hand Sundry Debtors Furniture Plant & Machinery Buildings 1,350 5,400 600 430 800 60,000 2,060 92,000 10,000 20,000 12,000

15. Following are the balances extracted from the ledger of Mr. Ketan . Prepare a Trial Balance as on 31st Dec. 2015. Particulars Rs. Particulars Rs. Capital A/c Drawings A/c Sundry Creditors Motor Car Expenses Sales Trade Expenses Insurance Opening Stock 40,000 4,000 18,440 3,000 29,560 8,500 1,030 8,500 Purchases Printing & Stationery Rent & Taxes Office Expenses Commission paid Sundry Debtors Discount Allowed Interest Received 26,500 3,000 2,500 7,000 5,000 18,000 2,970 2,000

16. The following balances are extracted from the books of Mr.Senthil . Prepare Trial Balance as on 30.6.2014. Capital 4,70,200 Machinery 1,58,800 Cash in hand 6,000 Sundry Debtors 48,000 Building 3,20,000 Repairs 5,400 Stock 33,000 Insurance premium 3,300 Sundry creditors 26,000 Sales 2,90,000 Commission paid 750 Telephone charges 6,450 Rent & Taxes 6,300 Furniture 11,000 Purchases 1,65,000 Discount earned 1,100 Salaries 70,600 Loan from Mohammed 51,000 Discount allowed 650 Reserve fund 5,900 Drawings 5,000 Bills receivable 8,600 Bad debts 1,350 Bills payable 6,000 [Answer : Rs. 8,50,200]