Preparation of Trial Balance (Journal Entries, Ledger Accounts and Trial Balance)

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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.

 

PROBLEM: 4

Manoj Sharma started AutoCAD consulting firm called MS AutoCAD Services; he has following transactions:

1: Cash contributed Rs 3,00,000 as capital.

2: Office equipment purchased on credit Rs 160,000.

3: Motor bike bought for Rs 1,90,000; paying Rs 90,000 in cash and signing a 14% loan agreement for the rest.

4: Paid Rs 6,000 for insurance of office assets.

5: Office supplies purchased on credit Rs 7,000.

6: Completed an AutoCAD assignment and received Rs 14,000 cash.

7: Received advance from a customer for assignment to be completed in August Rs 4,000

8: Invoiced a client for services completed Rs 12,000.

9: Cash paid of office equipment Rs 60,000. 

10: Utility bills paid Rs 3,250.

Required: (a) Journalise the above transactions by using accounting code and ledger folio number;

(b) Ledger account in continuous balance form 

Account codes:

Accounts payable	200	Cash	100	Capital	300
Account receivable	130	Insurance	110	Office equipment	180
Advance income	220	Loan payable	210	Service revenue	400
Office materials	120	Vehicle	160	Utility	500

*Invoiced = account receivable

SOLUTION

(A) Journal Entries

Journal Entries

In MS AutoCAD Services

Date	Particulars		A/c	LF	Debit	Credit
			Code	No.	Amount	Amount
	Cash account	Dr	100	2	300,000
July   1	To    Capital account		300	1		300,000
	(Being- business started with cash)
2	Equipment	Dr	180	3	160,000
	To Accounts payable		200	4		160,000
	(Being- office equipment purchased on credit)
3	Motor Bike account	Dr	160	5	190,000
	To Cash account		100	2		90,000
	To 14% Loan account		210	6		100,000
	(Being- bike purchase and partial payment paid)
4	Insurance  account	Dr	110	7	6,000
	To Cash		100	2		6,000
	(Being- insurance policy bought)
5	Office supplies account	Dr	120	8	7,000
	To Accounts payable		200	4		7,000
	(Being- office materials purchased on credit)
6	Cash account	Dr	100	2	14,000
	To Service revenue		400	9		14,000
	(Being- revenue received)
7	Cash account	Dr	100	2	4,000
	To Advance service revenue		220	10		4,000
	(Being- advance revenue received)
8	Accounts receivable account	Dr	130	11	12,000
	To  Service revenue		400	9		12,000
	(Being- billing for services rendered)
9	Account payable account	Dr	200	4	60,000
	To Cash account		100	2		60,000
	(Being: partial payment made for equipment)
10	Utility bills account	Dr	500	12	3,250
	To Cash account		100	2		3,250
	(Being: utility bills paid)

 

 

(b) Ledger account in continuous balance form 

Cash Account (2)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 1	Capital	1	300,000		300,000	Dr
July 3	Moto bike	5		90,000	210,000	Dr
July 4	Insurance	7		6,000	204,000	Dr
July 6	Service revenue	9	14,000		218,000	Dr
July 7	Advance service revenue	10	4,000		222,000	Dr
July 9	Account payable	4		60,000	162,000	Dr
July 10	Utility bills	12		3,250	158,750	Dr

 

Capital Account (1)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 1	Cash	2		300,000	300,000	Cr

 

Equipment Account (3)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 2	Account payable	4	160,000		160,000	Dr

 

Account Payable Account (4)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 2	Equipment	3		160,000	160,000	Cr
July 5	Office supplies	8		7,000	167,000	Cr
July 9	Cash	2	60,000		107,000	Cr

 

Moto Bike Account (5)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 3	Cash	2	90,000		90,000	Dr
July 3	14% Loan	6	100,000		190,000

 

14% Loan Account (6)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 3	Motor bike	5		100,000	100,000	Cr

 

Insurance Account (7)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 4	Cash	2	6,000		6,000	Dr

 

Office Supplies Account (8)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 5	Account payable	4	7,000		7,000	Dr

 

Service Revenue Account (9)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 6	Cash	2	0	14,000	14,000	Cr
July 8		11		12,000	26,000	Cr

 

Advance Service Revenue Account (10)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 7	Cash	2		4,000	4,000	Cr

 

Account Receivable Account (11)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 8	Service revenue	9	12,000		12,000	Dr

 

Utility Bills Account (12)

Date	Particulars	LF	Debit	Credit	Balance	Dr/Cr
July 10	Cash	2	3,250		3,250	Dr

 

 

Trial Balance of MS AutoCAD Services

SN	Name of the ledgers	Amount Dr	Amount Cr
1	Cash	158,750
2	Capital		300,000
3	Equipment	160,000
4	Account payable		107,000
5	Motor bike	190,000
6	14% Loan		100,000
7	Insurance	6,000
8	Office supplies	7,000
9	Service revenue		26,000
10	Advance service revenue		4,000
11	Account receivable	12,000
12	Utility bills	3,250
		537,000	537,000

 

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PROBLEMS   AND   ANSWERS

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

PROBLEM: 4

EP Online Study LLC has the following transaction: (all transaction through bank)

(a) Invested cash Rs 100,000 into business and converted into common stock of 1,000 shares @ Rs 100 each.

(b) Promissory note issued to take loan Rs 40,000.

(c) Equipment purchased of Rs 20,000.

(d) Purchase insurance policy in advance for Rs 8,000.

(e) Service provided of Rs 100,000.

(f) Service provided on account Rs 50,000.

(g) Service revenue received in advance Rs 20,000.

(h) Office expenses paid Rs 10,000.

(i) Office supplies purchased worth Rs 5,000.

(j) Office supplies purchased on account (credit) Rs 15,000

(k) Dividend distributed Rs 10,000.

(l) Invested in mutual fund Rs 75,500

Required: (a) Journal entries; (b) Ledger accounts in T from; (c) Ledger account in continuous balance form;

(d) Trial balance  

[Answer:  Trial balance 325,000]

 

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