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Trial Balance Long Problem and Solution (Journal Entries, 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

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.

(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]

SOLUTION

(a) Journal entries

Journal Entries

EP Online Study LLC

Date			LF	Dr Amount	Cr Amount
a	Bank account	Dr		100,000
	To Common stock account				100,000
	(Being- business commenced with equity shares)

b	Bank account	Dr		40,000
	To Promissory note				40,000
	(Being- note taken)

c	Equipment account	Dr		20,000
	To Bank account				20,000
	(Being- equipment purchased by cheque)

d	Advance insurance account	Dr		8,000
	To Bank account				8,000
	(Being: insurance policy purchased in advance)

e	Bank account	Dr		100,000
	To Service revenue account				100,000
	(Being: service provided in cash)

f	Account receivable account	Dr		50,000
	To Service revenue				50,000
	(Being: service provided on credit)

g	Bank account	Dr		20,000
	To Advance service revenue				20,000
	(Being: cheque received and discount allowed)

h	Office expenses account	Dr		10,000
	To Bank account				10,000
	(Being: office expenses paid)

i	Office supplies account	Dr		5,000
	To Bank account				5,000
	(Being: office supplies purchased)

j	Office supplies account	Dr		15,000
	To Account payable account				15,000
	(Being: office supplies purchased on account)

k	Dividend paid account	Dr		10,000
	To Bank account				10,000
	(Being: dividend paid)

l	Investment account	Dr		75.500
	To Bank account				75.500
	(Being: invested in mutual fund)

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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

(b) Ledger accounts in T form

Bank Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
a	To Common stock		100,000	c	By Equipment		20,000
b	To Promissory note		40,000	d	By Advance insurance		8,000
e	To Service revenue		100,000	h	By Office expenses		10,000
g	To Advance serv. revenue		20,000	i	By office supplies		5,000
				k	By Dividend paid		10,000
				l	By Investment		75,500
					By Balance c/d		131,500
			260,000				260,000
	To Balance b/d		131,500

Common Stock Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
Jan 1	To Balance c/d		100,000	a	By Bank		100,000

			100,000				100,000
					By Balance b/d		100,000

Promissory Note Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
	To Balance c/d		40,000	b	By Bank		40,000

			40,000				40,000
					By Balance b/d		40,000

Equipment Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
c	To Bank		20,000		By Balance c/d		20,000

			20,000				20,000
	To Balance b/d		20,000

Advance Insurance Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
d	To Bank		8,000		By balance c/d		8,000

			8,000				8,000
	To Balance b/d		8,000

Service Revenue Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
	To Balance c/d		150,000	e	By Bank		100,000
				f	By Account receivable		50,000
			150,000				150,000
					By Balance b/d		150,000

Account Receivable Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
f	To Service revenue		50,000		By Balance c/d		50,000

			50,000				50,000
	To Balance b/d		50,000

Advance Service Revenue Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
	To Balance c/d		20,000	g	By Bank		20,000

			20,000				20,000
					By Balance b/d		20,000

Office Expenses Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
h	To Bank		10,000		By Balance c/d		10,000

			10,000				10,000
	To Balance b/d		10,000

Office Supplies Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
i	To Bank		5,000		By Balance c/d		20,000
j	To Account payable		15,000
			20,000				20,000
	To Balance b/d		20,000

Account payable Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
	To Balance c/d		15,000	g	By Office supplies		15,000

			15,000				15,000
					By Balance b/d		15,000

Dividend Paid Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
k	To Bank		10,000		By Balance c/d		10,000

			10,000				10,000
	To Balance b/d		10,000

Investment Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
l	To Bank		75,500		By Balance c/d		75,500

			75,500				75,500
	To Balance b/d		75,500

(c) Ledger account in continuous balance form