Preparing of Trial Balance (Format and Problem and Solution)

Arjun EP

Published on: November 1, 2020

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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.

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 of ABC Traders

SN.	Debit (Dr)	Amount	Credit (Cr)	Amount
	Assets:		Capital and reserve:
	Goodwill	xxxx	Capital, Owner’s equity	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.

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	Name of ledgers	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

*******

PROBLEMS AND ANSWERS

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

PROBLEM: 1A

AS Traders has following extracted ledger balance for the first quarter of 2020:

Opening stock	40,000	Cash and bank	136,000
Owner’s equity	100,000	Advance commission received	20,000
Purchase	200,000	Account receivable	50,000
Sales revenue	400,000	Machinery	100,000
Salaries	50,000	Account payable	30,000
Capital reserve	50,000	Bad debts	19,000
Discount allowed	5,000

[Answer: TB = 600,000]

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

PROBLEM: 1B

BH Traders has following extracted ledger balance:

Opening stock	60,000	Expenses payable	40,000
Capital	120,000	Stationery	5,000
Purchase	200,000	Commission received	30,000
Sales	380,000	Rent	19,000
Wages and salary	50,000	Cash and bank	36,000
General reserve	50,000	Equipment	100,000
Bills receivable	150,000

[Answer: TB = 620,000]

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

PROBLEM: 1C

MK Traders has following extracted ledger balance:

Creditors	90,000	Fixed assets	210,000
Cash and bank	60,000	Cost of goods sold	290,000
Accrued liabilities	50,000	Sales revenue	400,000
Bills receivable	180,000	Salaries	200,000
Bills payable	420,000	Social security tax paid	2,000
Closing stock	300,000	Rent paid	53,000
Capital	350,000	Printing and stationery	15,000