- Accounting can be defined as, “a systematic process of identifying, recording, measuring, classifying, verifying, summarising, preparing, interpreting and communicating financial information”. Accounting is based on the premise of ‘double-entry system’ - which means that for every debit there has to be a corresponding credit. In the above definition, the process of classifying, verifying, summarising takes place through the Trial Balance.
- Trial Balance can be said to be like a summary sheet and not a financial statement- all accounts with their respective closing balances at the year-end under one roof, transported directly from the ledger. Thus, if all the steps prior to the preparation of trial balance are accurate, it will result in a perfect trial balance - the total of debits will match the total of credits.
Trial Balance of ……… as on March 31, 20XX
| Account Heads | Ledger Folio | Debits (Amount in Rs) | Credits (Amount in Rs) |
| -- | -- | -- | -- |
| Total | XXXXXXXXXXX | XXXXXXXXXXX |
- While this is generally prepared at the end of the accounting year, it may also be prepared on regular intervals - like weekly, monthly, quarterly and half-yearly, as per the requirements from time to time.
Objectives
- Arithmetical Accuracy of Ledger Accounts
- Assistance in locating errors
- Help in preparation of final accounts
- Important to Auditors
On April 01, 2016 Anees started a business with Rs. 100,000 and other transactions for the month are:
2. Purchase Furniture for Cash Rs. 7,000.
8. Purchase Goods for Cash Rs. 2,000 and for Credit Rs. 1,000 from Khalid Retail Store.
14. Sold Goods to Khan Brothers Rs. 12,000 and Cash Sales Rs. 5,000.
18. Owner withdrew of worth Rs. 2,000 for personal use.
22. Paid Khalid Retail Store Rs. 500.
26. Received Rs. 10,000 from Khan Brothers.
30. Paid Salaries Expense Rs. 2,000
In the books of Ms Anees
Journal
| Date (April’19) |
Particulars | Ref. No | Debit (Amount) | Credit (Amount) |
| 1 | Cash A/c …………………...Dr. To, Capital A/c |
100000 | 100000 | |
| 2 | Furniture A/c………………..Dr. To, Cash A/c |
7000 | 7000 | |
| 8 | Purchases A/c……………….Dr. To, Cash A/c To, Khalid Retail Store |
3000 | 2000 1000 |
|
| 14 | Cash A/c…………………...Dr. Khan Brother’s A/c………..Dr. To, Sales A/c |
5000 12000 |
17000 | |
| 18 | Drawings A/c……………...Dr. To, Cash A/c |
2000 | 2000 | |
| 22 | Khalid Retail Store A/c……...Dr. To, Cash A/c |
500 | 500 | |
| 26 | Cash A/c…………………..Dr. To, Khan Brothers A/c |
10000 | 10000 | |
| 30 | Salaries A/c………………..Dr. To, Cash A/c |
2000 | 2000 |
Ledger Accounts
Cash Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, capital | 100000 | By, Furniture | 7000 |
| To, Sales | 5000 | By, Purchases | 2000 |
| To, Khan | 10000 | By, drawings | 2000 |
| -- | -- | By, Khalid | 500 |
| -- | -- | By, Salaries | 2000 |
| -- | -- | By, bal c/d | 101500 |
Khan Brothers Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, Sales | 12000 | By, Cash | 10000 |
| -- | -- | By, bal c/d | 2000 |
Khalid Retail Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, Cash | 500 | By, Purchases | 1000 |
| To, bal c/d | 500 | -- | -- |
Furniture Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, Cash | 7000 | By, bal c/d | 7000 |
| -- | -- | -- | -- |
Drawings Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, Cash | 2000 | By, bal c/d | 2000 |
| -- | -- | -- | -- |
Purchases Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, Cash | 2000 | By, Bal c/d | 3000 |
| To, Khalid | 1000 | -- | -- |
Salaries Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, Cash | 2000 | By, bal c/d | 2000 |
| -- | -- | -- | -- |
Sales Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, bal c/d | 17000 | By, Cash | 5000 |
| -- | -- | By, Khan | 12000 |
Capital Account
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| To, bal c/d | 100000 | By, Cash | 100000 |
Type 1 Trial Balance: Trial Balance with Balances
- Here the trial balances are prepared with the closing balances of each ledger account. The debit balances of asset and expense accounts are recorded on the debit side of trial balance while the credit balances of liabilities and incomes are recorded on the credit side of trial balance. This is the most commonly used.
Trial Balance
| Heads of Account | Amount (Dr) | Amount (Cr) |
| Cash | 115000 | 13500 |
| Capital | -- | 100000 |
| Purchases | 3000 | -- |
| Sales | -- | 17000 |
| Khan Brothers | 12000 | 10000 |
| Khalid Retail | 500 | 1000 |
| Salaries | 2000 | -- |
| Drawings | 2000 | -- |
| Furniture | 7000 | -- |
| Total | 117500 | 117500 |
Type 2 Trial Balance: Trial Balance with Total Balances
- The trial balance is prepared by taking the total of each side of the accounts without balancing the accounts. This method of preparing a trial balance is not commonly used because it cannot help in the preparation of Financial Statement.
| Heads of Account | Total (Dr.) | Total (Cr.) |
| Cash | 101500 | -- |
| Capital | -- | 100000 |
| Purchases | 3000 | -- |
| Sales | -- | 17000 |
| Khan Brothers | 2000 | -- |
| Khalid Retail | -- | 500 |
| Salaries | 2000 | -- |
| Drawings | 2000 | -- |
| Furniture | 7000 | -- |
| Total | 141500 | 141500 |
