Chapter 4 - Trial balance


Trial Balance

A trial balance is used in bookkeeping to list all the balances in the ledger. It consists of two columns: one for debit balances, and one for credit balances. The trial balance gives a simple way to check that every transaction includes a debit and corresponding credit entry. A business prepares a trial balance periodically, usually at the end of every reporting period. The general purpose of producing a trial balance is to ensure the entries in a company's bookkeeping system are mathematically correct.

A trial balance is prepared to check the arithmetical accuracy of the double entries made in the ledger and as a basis to prepare financial statements.



Accounts having debit balances


Accounts having credit balances

1.

Purchases

1.

Revenue / Sales

2.

Return inwards / Sales return

2.

Return outwards / Purchases return

3.

Expenses

For example

Wages and Salaries, Rent and Rates, Insurance, Advertising, Administrative expenses, Carriage inwards (on purchases), Carriage outwards (on sales), Discount allowed

3.

Income and Gains

For example

Discount received

Commission received

Interest received

Rent received

4.

Non current assets

For example

Machinery, Equipment, Fixtures and Fittings, Warehouse, Land and Buildings

4.

Non current liabilities

For example

Loan from bank / friends / family

Mortgage

5.

Current assets

For example

Inventory

Trade receivables

Cash in hand / Petty Cash/ Cash at bank

Other receivables (Expenses prepaid/ paid in advance)

5.

Current liabilities

For example

Trade payables

Bank overdraft

Other payables (Expenses due / not yet paid)

6.

Drawings

6.

Capital




Q1. Prepare a Trial Balance as at 31st December 2016 from the following information


$

Revenue

85 000

Inventory-1st Jan 2016

3 750

Purchases

35 800

Carriage inwards

1 200

Carriage outwards

1 300

Return inwards

600

Return outwards

700

Discount allowed

300

Discount received

400

Wages and salaries

3 500

Rent and rates

1 500

Advertising

2 500

Interest paid on bank loan

900

Heat and Light

400

Machinery

40 000

Equipment

30 000

Fixtures and Fittings

15 000

Trade Receivables

18 000

Cash and Bank

12 000

Trade payables

14 000

10% Loan from Bank (2030)

11 000

Capital

63 650

Drawings

8 000


Q2. Prepare a Trial Balance as at 31st December 2015 from the following information


$

Revenue

103 000

Inventory-1st Jan 2015

5 700

Purchases

49 900

Carriage inwards

1 400

Carriage outwards

1 500

Return inwards

800

Return outwards

900

Discount allowed

500

Discount received

800

Wages and salaries

4 400

Rent and rates

1 800

Advertising

2 600

Interest paid on bank loan

1 200

Heat and Light

1 100

Plant and Machinery

55 000

Office Equipment

41 000

Fixtures and fittings

8 400

Trade Receivables

14 000

Cash and Bank

11 000

Trade payables

12 000

10% Loan from Bank (2030)

15 000

Capital

75 600

Drawings

7 000