Preparing A Trial Balance

We know that every business transaction is recorded by equal debits and credits and therefore the total of all debit entries must be equal to that of all credit entries in the ledger. At this stage we need a list of all the accounts balances to verify that the total of debit balance accounts will equal the total of credit balance accounts. This is called preparing a trail balance. Trail balance is a schedule or list of balances both debit and credit extracted from accounts in the ledger including the cash and bank balances from the cash book. The objects of a trail balance are: (i) It is a test of the arithmetical accuracy of the books; (ii) it is a proof that double entry of each transaction has been recorded; (iii) it provides the basis for the preparation of final accounts or financial statements – profit and loss account and the balance sheet; (iv) it provides a summary of all transactions of an accounting period so that management can use figures for comparison purposes. Trial Balance is not an account. It is only a list of or scheduled of balances of ledger accounts including cash and bank balances. The abbreviations Dr. and Cr. are never written on the left hand and right hand corners of its top. It is a prepared on a particular date. Trail Balance is prepared on General Journal sheet with two amount columns for debit and credit balances. The accounts having a debit balance are entered in the debit column and credit balance accounts are entered in the credit column. The debit column is added up and credit column is added up. The sums of each column should be equal. The standard format of a trail balance is given below:


Illustration
Arrange the Following Balances taken from the ledger of Sapna, Komal and Co. into a Trail Balance at 31 March, 1999.
        ____________________________________________________________________Rs.
    Cash______________________________________________________________    9,200
    Trade Debtors ______________________________________________________   15,000
    Rent  _____________________________________________________________ _  4,800
    Store   _____________________________________________________________ 18,000
    Salaries Payable   ____________________________________________________  1,500
    Insurance   ___________________________________________________________ 3,600
    Other expenses   ______________________________________________________ 5,500
    Land   ______________________________________________________________ 10,000
    Depreciation expenses     _________________________________________________800
    Accumulated Depreciation   _____________________________________________ 2,400
    Salaries Expenses   __________________________________________________ 20,400
    Motor Vehicle   _______________________________________________________ 4,000
    Trade creditors   _____________________________________________________ 25,000
    Cost of goods sold   __________________________________________________ 54,000
    Advance from a customers   ____________________________________________ 1,400
    Sales   ____________________________________________________________  90,000
    Drawings   ___________________________________________________________ 2,000
    Capital  ____________________________________________________________  27,000

Solution

Construction of A Trail Balance from a List of Balances

The students may be asked in an examination problem to prepare a trail balance from a given list of balances extracted from the ledger. This involves the selection of debit and credit balances. The following rules may be helpful in this regard:

Debit Balances: assets, drawings, sundry debtors, losses and expenses.
Credit Balances: liabilities, capital, sundry creditors, gains and incomes.



For more help in Preparing Trail Balance  click the button below to submit your homework assignment