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Trial Balance Problem and Solution | Journal Entries, Continue Ledger Accounts and Trial Balance

Arjun EP

Published on: October 17, 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 total method, balance method and compound method.

Balance method is most popular, therefore, this method is applied in this book and ebook.

Steps to prepare trial balance:

Step 1, Prepare journal entries,

Step 2, Prepare ledger accounts from journal entries,

Step 3, Find out debit or credit balance of ledger account (balance b/d),

Step 4, Transfer debit balance b/d to debit column of trail balance,

Step 5, Transfer credit balance b/d to credit column of trail balance,

Step 6, Do the sum or total of trial balance, debit and credit must be equal.

Note: if debit and credit of trail balance is not equal recheck above procedures

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

PROBLEM: 1A

Kalika Traders has following ledgers. From these accounting ledgers, prepare trial balance.

Capital Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
	To Balance c/d		1,00,000		By Bank account		1,00,000
			1,00,000				1,00,000
					By Balance b/d		1,00,000

Cash Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
	To Capital		1,00,000		By Rent		10,000
	To Sales		60,000		By Salary		15,000
					By Drawings		5,000
					By Purchase		50,000
					By Balance c/d		80,000
			1,60,000				1,60,000
	To Balance b/d		80,000

Purchase Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
	To Cash		50,000		By Balance c/d		50,000
			50,000				50,000
	To Balance b/d		50,000

Sales Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
	To Balance c/d		60,000		By cash		60,000
			60,000				60,000
					By Balance b/d		60,000

Rent Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
	To Cash		10,000		By Balance c/d		10,000
			10,000				10,000
	To Balance b/d		10,000

Salary Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
	To Cash		15,000		By Balance c/d		15,000
			15,000				15,000
	To Balance b/d		15,000

Drawings Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
	To Cash		5,000		By Balance c/d		5,000
			5,000				5,000
	To Balance b/d		5,000

Keep in Mind (KIM)

Debit brought down balance (balance b/d) is written in debit side of trial balance.

Credit brought down balance (balance b/d) is written in credit side of trial balance.

Debit carried down balance (balance c/d) is written in credit side of trial balance.

Credit carried down balance (balance c/d) is written in debit side of trial balance.

Trial Balance

Kalika Traders

SN	Name of Ledgers	LF	Amount Dr	Amount Cr
1	Capital	1		1,00,000
2	Cash	2	80,000
3	Purchase	3	50,000
4	Sales	4		60,000
5	Rent	5	10,000
6	Salary	6	15,000
7	Drawings	7	5,000
	Total		1,60,000	1,60,000

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

PROBLEM: 2B

The following transactions are given by EP Traders during the month of March:

(a) Invested $/₹/Rs 300,000 cash in the business as capital.

(b) Machinery purchased at cost of Rs 120,000. Paid Rs 40,000 as down payment and the rest after 3 months

(d) Purchased inventory on account Rs 200,000.

(e) Sale of inventory on account Rs 120,000 and for cash Rs 160,000.

(f) Advance rent paid Rs 20,000.

(g) Received Rs 90,000 from customers.

(h) Paid Rs 50,000 on accounts payable.

(i) Loan taken from Mega Bank Rs 100,000.

(j) Owner withdrew Rs 16,000 cash for personal use.

You are required to: (a) Record the above transactions in a journal;

(b) Post the journals in vertical format of ledgers; (c) Prepare a trial balance

[Answer: Trial balance = 910,000]

SOLUTION:

Journal Entries

In the book of EP Traders

Date	Particulars		LF	Amount Dr	Amount Cr
	Cash account	Dr	1	300,000
	To Capital account		2		300,000
	(Being- business started with cash)
	Machinery account	Dr	3	120,000
	To Cash account		1		40,000
	To Bills payable account		4		80,000
	(Being- machinery purchased and part payment in cash)
	Equipment account	Dr	5	50,000
	To Cash		1		50,000
	Record of purchase of equipment
	Purchases account	Dr	6	200,000
	To Bills payable account		4		200,000
	(Being- goods purchased on credit)
	Cash account	Dr	1	160,000
	Bills receivable account	Dr	7	120,000
	To Sales account		8		280,000
	(Being- goods sold for cash and credit)
	Advance rent account	Dr	9	20,000
	To Cash account		1		20,000
	(Being- advance rent paid)
	Cash account	Dr	1	90,000
	To Bills receivable		7		90,000
	(Being- cash received from accounts receivable)
	Bills payable	Dr	4	50,000
	To Cash		1		50,000
	(Being- cash paid for accounts payable)
	Cash account	Dr	1	100,000
	To Mega Bank Loan		10		100,000
	(Being- loan received from Mega Bank)
	Drawings account	Dr	11	16,000
	To Cash assets		1		16,000
	(Being- cash withdrawn for personal use)

Cash Account (LF 1)

Date	Particulars	LF	Debit	Credit	Balance
	Capital		300,000		300,000	Dr
	Machinery			40,000	260,000	Dr
	Equipment			50,000	210,000	Dr
	Sales		160,000		370,000	Dr
	Advance rent			20,000	350,000	Dr
	Bills receivable		90,000		440,000	Dr
	Bills payable			50,000	390,000	Dr
	Mega Bank loan		100,000		490,000	Dr
	Drawings			16,000	474,000	Dr

Capital Account (LF 2)

Date	Particulars	LF	Debit	Credit	Balance
	Cash			300,000	300,000	Cr

Machinery Account (LF 3)

Date	Particulars	LF	Debit	Credit	Balance
	Cash		40,000		40,000	Dr
	Bills payable		80,000		120,000	Dr

Bills Payable Account (LF 4)

Date	Particulars	LF	Debit	Credit	Balance
	Machinery			80,000	80,000	Cr
	Purchase			200,000	280,000	Cr
	Cash		50,000		230,000	Cr

Equipment Account (LF 5)

Date	Particulars	LF	Debit	Credit	Balance
	Cash		50,000		50,000	Dr

Purchase Account (LF 6)

Date	Particulars	LF	Debit	Credit	Balance
	Bills payable		200,000		200,000	Dr

Bills Receivable Account (LF 7)

Date	Particulars	LF	Debit	Credit	Balance
	Sales		120,000		120,000	Dr
	Cash			90,000	30,000	Dr

Sales Account (LK 8)

Date	Particulars	LF	Debit	Credit	Balance
	Cash			160,000	160,000	Cr
	Bills receivable			120,000	280,000	Cr

Advance Rent Account (LF 9)

Date	Particulars	LF	Debit	Credit	Balance
	Cash		20,000		20,000	Dr

Mega Bank Loan Account (LF 10)

Date	Particulars	LF	Debit	Credit	Balance
	Cash			100,000	100,000	Cr

Drawings Account (LF 11)

Date	Particulars	LF	Debit	Credit	Balance
	Cash		16,000		16,000	Dr

Trial Balance of EP Traders

SN	Name of Ledgers	LF	Amount Dr	Amount Cr
1	Cash	1	4,74,000
2	Capital	2		3,00,000
3	Machinery	3	1,20,000
4	Bills payable	4		2,30,000
5	Equipment	5	50,000
6	Purchase	6	2,00,000
7	Bills receivable	7	30,000
8	Sales	8		2,80,000
9	Advance rent	9	20,000
10	Mega Bank loan	10		1,00,000
11	Drawings	11	16,000
	Total		9,10,000	9,10,000