Trial Balance Long Problem and Solution (Journal Entries, Ledger Accounts and Trial Balance)

Arjun EP

Published on: October 18, 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: 7

EP Trading (P) Ltd has following summarised balance sheet of the first quarter (Q1):

Liabilities	Amount	Assets	Amount
Equity shares capital @ Rs 100	9,00,000	Equipment	6,40,000
Retained earnings	60,000	Ending inventory	1,65,000
Account payable	80,000	Account receivable	90,000
		Bank balance	1,45,000
	10,40,000		10,40,000

Firm does not write profit on inventory with journal entry;

Transactions during the second quarter (Q2) were:

a	The promoters of the company invested Rs 4,00,000 additional capital by depositing at the bank.
b	Cash withdrew from bank Rs 50,000 for the use of the business.
c	Inventory purchased from SL Suppliers on account Rs 3,00,000.
d	Computer (equipment) purchased of Rs 24,000 from Computer House on account; payment was made after 10 days by deducting 5% discount in cash.
e	Inventory sold to Big Bazaar of Rs 3,40,000 in cash and Rs 560,000 on account.
f	Payment made to SL Suppliers Rs 2,37,500 in cash after deducting 5% discount.
g	Issued a cash receipt slip to Big Bazaar for Rs 336,000 after 4% discount adjusted.
h	Office expenses paid Rs 1,30,000 by online banking and salaries paid Rs 1,25,000 in cash.

Additional information:

1. Firm charged depreciation Rs 80,000 on equipment for the period.

2. Office expenses remained unpaid Rs 12,500.

3. Firm valued ending inventory Rs 50,000.

Required: (a) Journal entries; (b) Triple column cash book; (c) Account receivable account; (d) Account payable account; (e) Equipment account; (f) Trial balance

[Answer: 24,16,200]

SOLUTION

Journal Entries

In the book of EP Trading (P) Ltd

Date	Particulars		LF	Dr Amount	Cr Amount
a	Bank account	Dr		400,000
	To Equity shares capital account				400,000
	(Being- additional capital invested by the)

b	Cash account	Dr		50,000
	To Bank				50,000
	(Being- cash withdrew from bank for office use)

c	Purchase account	Dr		300,000
	To Account payable				300,000
	(Being- inventory purchased SL Suppliers on credit)

d1	Equipment account	Dr		24,000
	To Account payable				24,000
	(Being: computer purchased on credit from
	Computer House

d2	Account payable	Dr		24,000
	To Cash account				22,800
	To Discount received account				1,200
	(Being: cash paid to Computer House and discount
	Received, 24,000@5%;

e	Cash account	Dr		340,000
	Account receivable account	Dr		560,000
	To Sales account				900,000
	(Being: inventory sold in cash and on account to
	Big Bazaar)

f	Account payable account	Dr		250,000
	To Cash account				237,500
	To Discount received				12,500
	(Being: cash paid to SL Suppliers and discount received)

g	Cash account	Dr		336,000
	Discount allowed account	Dr		14,000
	To Account receivable account				350,000
	(Being: cheque received from Big Bazaar and
	Discount allowed)

h1	Office expenses account	Dr		142,500
Adj2	To Bank account				130,000
	To Office expenses payable account				12,500
	(Being: office expenses paid and payable)

h2	Salaries account	Dr		125,000
	To Cash account				125,000
	(Being: salaries paid)

Adj1	Depreciation account	Dr		80,000
	To Equipment account				80,000
	(Being: depreciation charged on equipment)

Adj3	Ending inventory account	Dr		50,000
	To Income statement account				50,000
	(Being: unsold inventory recorded)

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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

Triple Column Cash Book

Date	Particulars	LF	Cash	Bank	Dis	Date	Particulars	LF	Cash	Bank	Dis
	To Balance b/d			145,000	–	b	By Cash		–	50,000	–
a	To capital			400,000
b	To Bank	C	50,000	–	–	d2	By Equipment		22,800		1,200
e	To Sales		340,000			f	By A/P		237,500		12,500
g	To A/R		336,000		14,000	h1	By Office exp			130,000
						h2	By Salary		125,000
									340,700	365,000
			726,000	545,000	14,000				726,000	545,000	13,700
	By Balance b/d		340,700	365,000

Account Payable Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
d2	To Cash		22,800		By Balance b/d		80,000
d2	To Discount received		1,200	c	By Purchase		300,000
f	To Cash		237,500	d1	By Equipment		24,000
f	To Discount received		12,500
	To Balance b/d		130,000
			404,000				404,000
					By Balance b/d		130,000

Account Receivable Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
	To Balance b/d		90,000	g	By Cash		336,000
e	To Sales		560,000	g	By Discount allowed		14,000
					By Balance c/d		300,000
			650,000				650,000
	To Balance b/d		300,000

Equipment Account

Date	Particulars	LF	Amount Dr	Date	Particulars	LF	Amount Cr
	To Balance b/d		640,000	adj 1	By Depreciation		80,000
d	To A/P		24,000		By Balance c/d		584,000

			664,000				664,000
	To Balance b/d		584,000

Trial balance of EP Traders

Name of ledgers	Amount Dr	Amount Cr
Equity shares capital		13,00,000
Retained earnings		60,000
Account payable		130,000
Equipment	5,84,000
Beginning inventory (ending inventory of Q1)	1,65,000
Account receivable	3,00,000
Cash	3,40,700
Bank	3,65,000
Discount allowed	14,000
Discount received		13,700
Purchase	3,00,000
Sales		9,00,000
Office expenses	1,42,500
Office expenses payable		12,500
Salaries	1,25,000
Depreciation	80,000
	24,16,200	24,16,200