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Trial balance

General Accounting Principles Accounting cycles

Trial balance

TRIAL BALANCE

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

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 boththe 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 ofBookkeeping.

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 Rentand

Paid Salary

5000

500

200

400

1000

600

300

100

200

8600

Example

Date	Particular	Lf	Dr.	Cr.
1	Casha/c Dr		5000
	To Capital			5000
	(Being the amount invested by Mohan in the
	business as capital)
2	Bank A/c Dr.		500
	To Cash Account			500
	(Being the amount paid into bank)
3	FurnitureA/c Dr.		200
	To Cash Account			200
	(Being furniture purchased for cash)
4	PurchasesA/c Dr.		400
	To Cash Account			400
	(Being goods purchased for cash)
5	PurchasesA/c Dr.		1000
	To M/s Ram Narain			1000
	(Being goods purchased for cash)
6	CashA/c Dr.		600
	To Sales Account			600
	(Being goods sold for cash)
7	Ramesha/c Dr.		300
	To Sales Account			300
	(Being goods sold to Ramesh on credit)
8	CashA/c Dr.		300
	To Ramesh			300
	(Being cash received from Ramesh)
9	RentA/c Dr.		100
	Salary A/c Dr.		200	100
	To Cash Account			200
	(Being Rent and salary paid)

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 BankAccount 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	JF	Amount	Date	Particulars	JF	Amount
	To Cash		400
	Account
	To M/s Ram
	Narain		1,000
			1400				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
BalanceMethod
CompoundMethod

Total Method

The Total Method of Preparing the Trial Balance In this, the total of each side of the account is entered respectively in the debit and credit columns of the Trial Balance. This is known as the Gross Trial Balance.

Trial balance as at 31st March,20XX

s no.	Particular	Dr	Cr
1	Cash Account	5900	1400
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
10	Ramesh a/c	300	300
	Total	8600	8600

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 31st 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

Compound Method

Compound method is the combination of both the methods, total method and balance method. Thus, compound method is also known as total cum balance method

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:

The transactions have not been entered at all in thejournal.
An incorrect amount has been written in both column of thejournal.
An incorrect account has been mentioned in thejournal.
An entry has not been completely posted in theledger.
Entry is posted twice in theledger

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) iscalled the unadjusted trialbalance.
The next thing that happens is that any errors identified are corrected, and otheradjustments are made to ensure the record-keeping is in line with accountingstandards.

At this point the trial balance is known as the adjusted trial balance and the financial statements areprepared.
After the closing entries are done and the year is over, we call the trial balance thepost-closing trialbalance.

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