–
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.
There are three methods to prepare trial balance. They are as follows:
Under total method, trial balance is prepared by taking the total of debits and credit of all ledger accounts.
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 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 |
[Answer: TB = 13,10,000]
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