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Trial Balance
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Trial balance• It is a bridge between ledger
accounts and final accounts• Trial balance is prepared with debit
and credit balances of ledger accounts to check the arithmetical accuracy of the books.
• It is just a statement and is prepared as on a particular date
• It can be prepared at any time of the year but it must be prepared before preparation of final accounts
• It verifies the fundamental principle of double entry system i.e. equality of debit and credit.
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Preparation of trial balance• There are different methods of
preparation of trial balance• Totals method• Balance method• Mixed method
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Forms of trial balance
Serial No.
Heads (Names of accounts)
Ledger folio
Debit totals
Credit totals
Trial Balance as at ……
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Forms of trial balance
Serial No.
Heads (Names of accounts)
Ledger folio
Debit balances
Credit balances
Trial Balance as at ……
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Forms of trial balance
Serial No.
Heads ofaccounts
LF Debit totals
Credit totals
Debit balances
Credit balances
Trial Balance as at ……
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Hints for preparation of trial balance• Only those ledger accounts which
show balances should appear in the trial balance.
• If a ledger account shows a debit balance it should appear in the debit column of the trial balance.
• If a ledger account shows a credit balance it should appear in the credit column of the trial balance.
• Capital account should show a credit balance
• Drawings account should show a debit balance
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Hints for preparation of trial balance• Sundry debtors account will show a
debit balance• Sundry creditors account will show a
credit balance• Bank account may show a debit or
credit balance. If it shows a debit balance, it means cash at bank. If it shows a credit balance, it means bank overdraft.
• Cash account will always show a debit balance which means cash in hand
• Purchases account will show a debit balance
• Sales account will show a credit balance
• Purchases returns account will show a credit balance
• Sales returns account will show a debit balance
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Hints for preparation of trial balance• Opening stock account will show a
debit balance• Investment account will show a
debit balance• Accounts of fixed assets show a
debit balance• Bills receivable account will show a
debit balance• Bills payable account will have a
credit balance• Accounts of expenses and losses will
show a debit balance• Accounts of incomes and gains will
show a credit balance• Closing stock does not appear in the
trial balance
Advantages of trial balance• All the balances of various
accounts are available at a single place
• Arithmetic accuracy of books of accounts can be ascertained
• It is the basis for preparation of profit and loss account
• It is the proof that all entries have been recorded on the basis of double entry system.
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Limitations of trial balance• Certain errors are not revealed
inspite of the trial balance having balanced
• If the trial balance is erroneous, the final accounts will not be accurate
• This can be used only when double entry system of bookkeeping is used.
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Undisclosed errors • Omission of an entry in a
subsidiary book• A wrong entry in a subsidiary
book• Posting to the correct side but
in a wrong account• Errors of principle
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Problems • From the following extracted from
the books of Gopal as on 31.12.2006. Prepare a trial balance
• Gopal’s capital 7000• Purchases 8000• Rent paid 240• gopal’s drawings 400• Bills receivable 1200• Opening stock 1000• Purchases returns 280• Sales returns 160• Plant and machinery 4000• Sales 9600• Sundry debtors 5600
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Problems (cont.)• Furniture 500• Salaries 720• Sundry creditors 5600• Carriage 100• Insurance 40• Cash in hand 100• Cash at bank 1950• Commission paid 40• Bills payable 1580• Discount received 30• Discount allowed 40
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Solution Serial No.
Heads (Names of accounts)
Ledger folio
Debit balances
Credit balances
1 Gopal’s capital 7000
2 Purchases 8000
3 Rent paid 240
4 Gopal’s drawings 400
5 Bills receivable 1200
6 Opening stock 1000
7 Purchases returns 280
8 Sales returns 160
9 Plant and machinery 4000
10 Sales 9600
11 Sundry debtors 5600
12 Furniture 500
13 Salaries 720
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Solution Serial No.
Heads (Names of accounts)
Ledger folio
Debit balances
Credit balances
14 Sundry creditors 5600
15 Carriage 100
16 Insurance 40
17 Cash in hand 100
18 Cash at bank 1950
19 Commission paid 40
20 Bills payable 1580
21 Discount received 30
22 Discount allowed 40
24090 24090
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Correct the following trial balance
Capital 24000
Stock as on 1.1.2006 8500
Furniture 2600
Purchases 8950
Cash at bank 7300
Carriage 300
Sales 22500
Buildings 12000
Return inwards 1900
Return outwards 350
Trade expenses 1000
Discount received 970
Salary 3000
Office rent 2270
60020 35620
Dr. Cr.
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Correct the following trial balance
Capital 94000
Purchases 60000
Reserve fund 20000
Sales 100000
Purchases returns 1000
Sales return 2000
Opening stock 30000
Closing stock 40000
Expenses 20000
Outstanding expenses 2000
Bank balance 5000
Assets 50000
Debtors 80000
Creditors 30000
Suspense a/c 10000
272000 272000
Dr. Cr.