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Trial balance

Accountancy (11th) Chapter-6 Trial Balance and Rectification of Errors

Trial balance

TRIAL BALANCE

“A Trial Balance is a statement, prepared with debit and credit balances of the Ledger Accounts to test the arithmetical accuracy of the books.”

J.R. Batliboi

Trial Balance may be defined as a statement which contains balances of all ledger accounts on a particular date.( Generally at the end of the year)

Dual Aspect Concept-

Every journal entry debit and credit aspect which further goes into the ledger, subsidiary books as well as cash book. The balances in this account is then taken into Trial Balance which would agree as both the debit & credit part has been considered. Trial Balance proves only the arithmetical accuracy of posting in the ledger. Trial Balance is a statement, list, worksheet and the result of double entry bookkeeping. But, it is not a part of double entry of Bookkeeping.

FORMAT

TRIAL BALANCE AS AT -

S NO.

Name of Account

Dr. Amount

( Total/Balance)

Cr Amount

( Total/Balance)

Example

Date

Particular

Amount

Mohan started business with cash

Deposit in the bank

Furniture purchased for cash

Purchased goods for cash

Purchased goods from M/s Ram Narain on credit Goods sold to M/s Ram & Co. for cash

Goods sold on credit to Ramesh

Received cash from Ramesh

Paid Rent and

Paid Salary

5000

500

200

400

1000

600

300

100

200

8600

Date

Particular

Dr.

Cr.

Cash a/c Dr

To Capital

(Being the amount invested by Mohan in the business as capital)

Bank A/c Dr.

To Cash Account

(Being the amount paid into bank)

Furniture A/c Dr.

To Cash Account

(Being furniture purchased for cash)

Purchases A/c Dr.

To Cash Account

(Being goods purchased for cash)

Purchases A/c Dr.

To M/s Ram Narain

(Being goods purchased for cash)

Cash A/c Dr.

To Sales Account

(Being goods sold for cash)

Ramesh a/c Dr.

To Sales Account

(Being goods sold to Ramesh on credit)

Cash A/c Dr.

To Ramesh

(Being cash received from Ramesh)

Rent A/c Dr.

Salary A/c Dr.

To Cash Account

(Being Rent and salary paid)

5000

500

200

400

1000

600

300

100

200

5000

500

200

400

1000

600

300

100

200

Cash A/C

Date	Particular	JF	Amount	Date	Particular	JF	Amount
	To Mohan?s Capital a/c To Sales Account To Ramesh Account		5000 600 300		By Bank Account By Furniture Account By Purchase Account By Rent Account By Salary Account By Balance c/d		500 200 400 100 200 4500
	Total		5,900		Total		5,900
	To Bal b/d		4,500

Capital A/C

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
	To bal c/d		5,000		By Cash Account		5,000
			5000				5000
					By bal b/d		5000

Bank A/C

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
	To cash		500		By bal c/d		500
	Total		500		Total		500
	To bal b/d		500

Purchase A/C

Date

Particulars

Amount

Date

Particulars

Amount

To Cash Account

To M/s Ram Narain

400

1,000

1400

Furniture

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
	To Cash Account		200
					By Bal c/d		200
			200				200
	To bal b/d		200

M/S Ram Narain

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
	To Bal c/d		1,000		By purchase account		1,000
			1000				1000
					By bal b/d		1000

Ramesh A/C

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
	To Sales		300		By cash		300

			300				300

Rent a/c

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
	To Cash		100

			100

Salary A/C

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
	To Cash		200

			200

Methods of Trial Balance

Total Method
Balance Method
Compound Method

Only balance method is in our syllabus

Balance Method

The Balance Method of Preparing the Trial Balance In this, balances are entered separately in the debit and credit columns of the Trial Balance. This is known as the Net Trial Balance.

Trial balance as at 31^st March,20XX

s no.	Particular	Dr	Cr
1	Cash Account	4500
2	Capital Account		5000
3	Bank Account	500
4	Purchase Account	1400
5	Sales Account		900
6	Furniture Account	200
7	M/s Ram Narain Account		1000
8	Rent Account	100
9	Salary Account	200


	Total	6900	6900

Limitations -

One should note that the agreement of trial balance is not conclusive proof of accuracy. In simple words, in spite of the agreement of the trial balance some errors may remain. These may be of the following types:

1. The transactions has not been entered at all in the journal.

2. An incorrect amount has been written in both column of the journal.

3. An incorrect account has been mentioned in the journal.

4. An entry has not been completely posted in the ledger.

5. Entry is posted twice in the ledger

Unadjusted and Adjusted Trial Balances

There are different terms used to describe the trial balance at different points in time.

The first trial balance (before any end-of-year corrections and adjustments are made) is called the unadjusted trial balance.
The next thing that happens is that any errors identified are corrected, and other adjustments are made to ensure the record-keeping is in line with accounting standards.
At this point the trial balance is known as the adjusted trial balance and the financial statements are prepared.
After the closing entries are done and the year is over, we call the trial balance the post-closing trial balance.

Treatment of closing stock-

Closing stock is not shown in the trial balance normally

It is included only if there is adjusted purchases given in the trial balance.

Suspense Account-

Suspense accounts are used when your trial balance is out of balance or when you have an unidentified transaction. The suspense account is a general ledger account that acts as a holding account until the error is discovered or the unknown transaction is identified

Suspense account is kept till the time the books are not corrected, once corrected it is removed from trial balance.

Dr side of Trial Balance suspense