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 |
|
#######
Click on link for YouTube videos topic wise : |
|
Accounting Equation |
|
Basic Journal Entries in Nepali |
|
Basic Journal Entries |
|
Journal Entry and Ledger |
|
Ledger Account |
|
Subsidiary Book |
|
Cash Book |
|
Trial Balance and Adjusted Trial Balance |
|
Bank Reconciliation Statement (BRS) |
|
Depreciation |
|
Click on link for YouTube videos chapter wise: |
|
Financial Accounting and Analysis (All videos) |
|
Accounting Process |
|
Accounting for Long Lived Assets |
|
Analysis of Financial Statement |
#######
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
(c) Purchased equipment for Rs 50,000.
(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 |
|
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