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Methods of Preparing Trial Balance (Format and Problem and Solution)

Arjun EP

Published on: October 16, 2020

Preparation of trial balance

Trial balance is prepared to check arithmetical accuracy of debit and credit balance.

If there is any error, it is rectified with journal entries.

Trial balance can be prepared at any time.

Generally, it is prepared at the end of every month.

But it can be prepared quarterly or half yearly.

It is compulsorily prepared at the close of every accounting period to verify the arithmetical accuracy of the ledger accounts.

Methods of preparation of trial balance

There are three methods to prepare trial balance. They are as follows:

Total method

Under total method, trial balance is prepared by taking the total of debits and credit of all ledger accounts.

Balance method

Under balance method, only the balances of all the ledger accounts are taken to prepare the trial balance.

Balance method is the most popular method to prepare trial balance.

Compound method

Compound method is the combination of both total method and balance methods.

Compound method is also known as total-cum-balance method.

Trial Balance

ABC Traders

SN.	Debit (Dr)	Amount	Credit (Cr)	Amount
	Assets:		Capital and reserve:
	Goodwill	xxxx	Capital	xxxx
	Land and building	xxxx	General reserve	xxxx
	Plant and machinery	xxxx	Capital reserve	xxxx
	Furniture and fitting	xxxx	Reserve fund	xxxx
	Stock (inventory, merchandise)	xxxx	Reserve for bad debts (doubtful debts)	xxxx
	Prepaid expenses	xxxx	Liabilities:
	Debtors (book debts)	xxxx	Creditors	xxxx
	Bills receivable	xxxx	Bills payable	xxxx
	Account receivable	xxxx	Account payable	xxxx
	Accrued income	xxxx	Loan (10% Loan)	xxxx
	Cash balance	xxxx	Outstanding expenses	xxxx
	Bank balance	xxxx	Advance income	xxxx
	Expenses:		Revenue and income:
	Opening stock	xxxx	Sales	xxxx
	Purchase	xxxx	Interest received	xxxx
	Carriage inward/outward	xxxx	Discount received	xxxx
	Purchase expenses	xxxx	Commission received	xxxx
	Factory expenses	xxxx	Rent received	xxxx
	Office expenses	xxxx	Bad debts received	xxxx
	Selling expenses	xxxx	Other income	xxxx
	Distribution expenses	xxxx
	Financial expenses	xxxx	Gain:
	Bad debts	xxxx	Gain on sales of assets	xxxx
	Discount allowed	xxxx	Gain on sales of investment	xxxx
	Interest paid	xxxx
	Commission paid	xxxx	Return:
	Rent paid	xxxx	Purchase return	xxxx
	Other expenses	xxxx
	Losses:
	Loss on sales of assets	xxxx
	Loss on sales of investment	xxxx
	Return:
	Sales return	xxxx
		xxxx		xxxxx

Note: Generally closing stock is adjusted separately.

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Click on link for YouTube videos topic wise :
Accounting Equation	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger Account	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance and Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
Click on link for YouTube videos chapter wise:
Financial Accounting and Analysis (All videos)	http://tiny.cc/jlersz
Accounting Process	http://tiny.cc/mlersz
Accounting for Long Lived Assets	http://tiny.cc/plersz
Analysis of Financial Statement	http://tiny.cc/slersz

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Keep in Mind

Following expenses are debited in trial balance:
Trading Account	Office or Administrative Expenses:	Selling and Distribution Expenses:
*Purchase expenses:*	Salary and wages	Carriage or freight outward
Carriage or carriage inward	Director’s fees	Carriage or freight on sales
Freight or freight inward	Office rent, rates and tax	Travelling expenses
Carriage on purchase	Printing and stationery	Advertisement and publicity
Purchase expenses	Postage expenses	Free sample
Octoi	Insurance	Sales expenses
Import duty or custom duty	Phone, mobile, internet expenses	Packing expenses
Clearing charge	Bank charge	Salary to sales agent
Dock charge (dock dues)	Legal charge	Commission to sales agent
Coolie and cartage	License fees	Rent of warehouse or godown
Packing on purchase	Audit fee	Stationery, postage expenses
*Factory expenses:*	Interest on loan	Phone, mobile, internet expenses
Wages and salary	Staff benefits	Insurance of warehouse
Productive wages	Bonus to staff	Trade or trading expenses
Store keeper’s salary	Office lighting and power	Delivery expenses
Fuel and power	Entertainment expenses	Bad debts
Motive power	General expenses	Provision for bade debts
Store consumed*	Establishment expenses	Discount allowed
Coal, gas, stem and water	Commission paid	Sales tax or VAT or GST
Heating and power	Manager’s commission
Excise duty	Interest on capital	*Non-cash expenses:*
Royalty (for manufacturing)	*Non-cash expenses:*	Depreciation on warehouse
Factory insurance	Depreciation on equipment	Depreciation on delivery van
Factory rent, rates and taxes	Depreciation on furniture
Estimate expenses	Depreciation on land building	*Other expenses and losses:*
Benefit to workers		Loss by fire or theft

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1A

TK Traders had following accounts balances:

Name of ledgers	Amount		Amount
Bank	20,000	Salary	40,000
Equipment	100,000	Rent	12,000
Purchase	46,000	Sales	90,000
Debtors	22,000	Capital	160,000
Furniture	50,000	Creditors	40,000

Required: Trial balance

[Answer: Trial balance = 290,000]

SOLUTION:

Trial balance of TK Traders

Particulars	Amount Dr	Amount Cr
Bank	20,000
Equipment	1,00,000
Purchase	46,000
Debtors	22,000
Furniture	50,000
Salary	40,000
Rent	12,000
Sales		90,000
Capital		1,60,000
Creditors		40,000
Total	2,90,000	2,90,000

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1B

Salman Traders has following balances of ledger on 31^st December 2019:

Ledger balances	Amount	Ledger balances	Amount
Opening stock	30,000	Carriage inwards	5,000
Plant and machinery	80,000	Office salaries	25,000
Furniture	40,000	Bad debts	500
Debtors	80,000	General expenses	1,500
Cash at bank	26,000	Insurance for business	2,000
Purchases	200,000	Office rent	20,000
Wages	30,000	Drawings	15,000
Capital	150,000	Purchase returned	10,000
Bank loan	50,000	Reserve for bad debts	2,000
Sundry creditors	40,000	Discount received	3,000
Sales	300,000

Required: Trial balance

[Answer: Total 555,000]

SOLUTION

Trial balance of Salman Traders

Particulars	Amount Dr	Amount Cr
Opening stock	30,000
Plant and machinery	80,000
Furniture	40,000
Debtors	80,000
Cash at bank	26,000
Purchases	200,000
Wages	30,000
Capital		150,000
Bank loan		50,000
Sundry creditors		40,000
Sales		300,000
General expenses	1,500
Insurance for business	2,000
Office rent	20,000
Drawings	15,000
Purchase returned		10,000
Reserve for bad debts		2,000
Discount and commission		3,000
Carriage inwards	5,000
Office salaries	25,000
Bad debts	500
Total	555,000	555,000

*******

PROBLEMS AND ANSWERS

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1A

Following accounts balances are given to you by Manisha Traders:

Name of ledgers	Amount	Name of ledgers	Amount
Capital	1,00,000	Rent paid	20,000
Purchase	50,000	Furniture	10,000
Sales revenue	1,30,000	Carriage outward	5,000
Opening stock	10,000	Debtors	20,000
Wages	15,000	Plant and machinery	1,50,000
Creditors	20,000	Bank loan	30,000

Required: Trial balance

[Answer: Trial balance = Rs 2,80,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1B

Following accounts balances are given to you by Binisha Suppliers:

Name of ledgers	Amount	Name of ledgers	Amount
Purchase	2,00,000	Rent received	70,000
Sales return	15,000	Land and building	4,00,000
Sales revenue	5,00,000	Account receivable	50,000
Goodwill	50,000	Plant and machinery	2,80,000
Salaries	60,000	Account payable	90,000
Prepaid insurance	10,000	Capital	4,05,000

Required: Trial balance

[Answer: Trial balance = 10,65,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1C

XYZ Traders has following accounts balance on 31^st December 2019:

Name of ledgers	Amount	Name of ledgers	Amount
Purchase	310,000	Advance insurance	3,300
Carriage	5,000	Plant and machinery	150,000
Salaries	24,000	Bad debts	2,000
Electricity charge	4,500	Sundry debtors	45,000
Travelling expenses	8,900	Bills receivable	30,000
Telephone expenses	4,300	Cash in hand	8,000
Advertisement	10,000	Drawing	10,000
Bank overdraft	80,000	Sales	300,000
Bills payable	10,000	Advance rent	20,000
Capital	120,000	Creditors	85,000

Required: Trial balance

[Answer: Total 615,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1D

The following is ledgers balances of AK Trading Concern on 31^st December 2019:

Accounts heads	Amount	Accounts heads	Amount
Buildings	200,000	Capital	400,000
Drawings	50,000	12% Loan	50,000
Furniture	30,000	Sales	395,000
Creditors	50,000	Bank balance	10,500
Provision for bad debts	2,500	Bills receivables	40,000
Bills payables	44,000	Return inward	8,000
Return outward	5,000	Salaries	51,000
Vehicles	50,000	Commission (Cr)	3,000
Interest on loan	3,000	Insurance	5,000
Purchases	242,000	Debtors	100,000
Beginning stock	130,000	Wages	30,000

Required: Trial balance

[Answer: Total 949,500]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1E

The following ledger balances of AF Trading Concern for the year ending 31^st December 2019 is given:

Ledger balances	Amount	Ledger balances	Amount
Land and Building	15,000	Insurance	900
Goodwill	10,000	Debtors	10,000
Drawing	5,000	Salaries	7,400
Freight on sales	500	Wages	3,000
Closing stock	7,000	Sales return	500
Discount allowed	500	Purchases	48,000
Cash at bank	2,200	Opening stock	12,000
Bad debts	500	Unearned commission	2,000
Purchase return	1,500	Overdraft	12,000
Sales	90,000	Reserve of doubtful debts	1,000
Capital	45,000	Creditors	13,000
Plant and machinery	42,000