Chapter 3 (Part 1) Introduction to Trial Balance.pdf
- 1. CHAPTER 3 (PART 1) THE TRIAL BALANCE
- 2. LEARNING OUTCOMES Students able to briefly explain the meaning of a trial balance. Students able to briefly explain the main purposes of preparing a trial balance. Students able to prepare the trial balance correctly.
- 3. WHAT IS A TRIAL BALANCE ? Definition: A list of account balances in the ledger at a certain date.
- 4. EXAMPLE OF A TRIAL BALANCE Hocus Pocus Enterprise Trial balance at 31 December 2015 Dr Cr Sales 20 000 Purchases 15 000 Wages 3 000 Lighting and heating 500 Rental paid 600 Inventory 400 Trade receivable 1 000 Bank 500 Trade payable 500 Capital 500 21 000 21 000 Business name Title of list Account names
- 5. PURPOSES OF THE TRIAL BALANCE To check arithmetical accuracy of the accounts. To be used as a basis for preparation of final accounts.
- 6. PREPARING A TRIAL BALANCE Determine the account balance for each T- Account. A trial balance is a list of all accounts and their balances. It provides a means to assure that the total debits equal total credits.
- 7. ADARSH'S LEDGER Bank account Sept 1Capital 90,000 Sept 2Rent paid 400 27Vinod 2,890 30Balance c/d 86,710 90,000 90,000 Oct 1Balance b/d 86,710 Capital account Sept 1Bank 90,000 Rent paid account Sept 2Bank 400
- 8. Vinod account Sept 21Purchases returns 110 Sept 4Purchases 2,100 27Bank 2,890 14Purchases 900 3,000 3,000 Purchases account Sept 4Vinod 2,100 Sept 29Drawings 130 14Vinod 900 30Balance c/d 2,870 3,000 3,000 Oct 1Balance b/d 2,870 Purchases returns account Sept 21Vinod 110
- 9. Cash account Sept 8Sales 170 Sept 11Sundry expenses 32 25Wages 120 30Balance c/d 18 170 170 Oct 1Balance b/d 18 Sales account Sept 30Balance c/d 550 Sept 8Cash 170 19Kaveri 380 550 550 Oct 1Balance b/d 550 Sundry Expenses account Sept 11Cash 32
- 10. Kaveri account Sept 19Sales 380 Wages account Sept 25Cash 120 Drawings account Sept 29Purchases 130
- 11. ADARSH Trial Balance at 30 September 20-3 Dr Cr Bank 86,710 Capital 90,000 Rent paid 400 Purchases 2,870 Purchases returns 110 Cash 18 Sales 550 Sundry expenses 32 Kaveri 380 Wages 120 Drawings 130 90,660 90,660
- 12. REMEMBERING NORMAL BALANCES D E A D C L I C D E A D EXPENSES DRAWINGS ASSETS DEBIT C L I C CREDIT LIABILITIES INCOME CAPITAL
- 13. REFLECTION What are the two (2) main purposes of a trial balance ? How to distinguish between accounts which have debit balances and those which have credit balances ?