TRIAL BALANCE

Trial Balance

Objectives.

After studying this sub-topic, you will be able to:

-         State the meaning of Trial Balance;

-         Explain the objectives or purposes of preparing Trial Balance;

-         Prepare a Trial Balance

Meaning of trial balance:

Trial Balance may be defined as a statement which contains balances of all ledger accounts on a particular date. This is also defined as the statement showing a list of debit and credit balances extracted from the ledger prepared at the end of accounting period.

Ledger balances are segregated into debit balances and credit balances. If all accounting entries are recorded correctly and all the ledger balances are accurately extracted, the total of all debit balances appearing in the trial balance must equal to the sum of all credit balances.

Objectives or purposes of preparing a Trial balance

        i.            To check, verify or ensure the arithmetical accuracy of double-entry

      ii.            To help in preparing financial statements

    iii.            Helps in locating errors

    iv.            Helps in comparison

      v.            Helps in making adjustments

Note: Trial Balance is generally prepared at the end of the year. However it can be prepared at any time during the accounting year to check the accuracy of the posting.

How to prepare a Trial balance

a)      Balance each account in the ledger

b)      List the accounts in the order in which they come in the ledger, leaving out the accounts with zero balance.

c)      Fill each account listed with the amount in the appropriate column of the trial balance, “debit” in the ‘Dr’ column and “Credit” in the ‘Cr’ column.

d)     Add up the amounts in both columns and see if the totals balance.

Format of a Trial Balance

TRIAL BALSNCE AS AT ----

Name of account	Dr	Cr
Cash Capital Purchases Sales Expenses	XXX   XXX   XXX	XXX   XXX
	XXXX	XXXX

 

Example.

Mrs. Waka commenced as follows

March 1 Capital in cash Tsh. 260,000

2 Purchased goods for cash Tsh. 70,000

3 Sold goods for cash Tsh. 90,000

7 Purchased goods for cash Tsh. 30,000

13 Bought packing materials Tsh. 5,000

19 Paid transport charges Tsh. 3,500

21 Bought more goods for cash Tsh. 20,000

24 Paid insurances for cash Tsh. 6,000

27 Sold goods for cash 60,000

Open the ledger accounts to record the above information, balance off the accounts and extract the Trial Balance

Solution

CASH ACCOUNT (1)

Dr                                                                                                                                                Cr
Date	Particulars	Folio	Amount	Date	Particulars	Folio	Amount
March. 1 3 27               April. 1	Capital Sales Sales               Balance	2 4 4               b/d	260,000 90,000 60,000	March. 2 7 13   19   21 24 31	Purchases Purchases Packing materials Transport Charges Purchases Insurances Balance	3 3   5   6 3 7 c/d	70,000 30,000   5,000   3,500 20,000 6,000 275,000
			410,000				410,000
			275,000

 

CAPITAL ACCOUNT (2)

Dr                                                                                                                                                Cr
Date	Particulars	Folio	Amount	Date	Particulars	Folio	Amount
March. 31	Balance	c/d	260,000	March. 1     April. 1	Cash     Balance	b/d	260,000
			260,000				260,000
							260,000

 

PURCHASES ACCOUNT (3)

Dr                                                                                                                                                Cr
Date	Particulars	Folio	Amount	Date	Particulars	Folio	Amount
March. 2 7 21 April. 1	Cash Cash Cash Balance	b/d	70,000 30,000 20,000	March. 31	Balance	c/d	120,000
			120,000				120,000
			120,000

 

SALES ACCOUNT (4)

Dr                                                                                                                                                Cr
Date	Particulars	Folio	Amount	Date	Particulars	Folio	Amount
March. 31	Balance	c/d	150,000	March. 3 27     April. 1	Cash Cash   Balance	b/d	90,000 60,000
			150,000				150,000
							150,000

 

PACKING MATERIAL ACCOUNT (5)

Dr                                                                                                                                                Cr
Date	Particulars	Folio	Amount	Date	Particulars	Folio	Amount
March. 13 April. 1	Cash   Balance	b/d	5,000	March. 31	Balance	c/d	5,000
			5,000				5,000
			5,000

TRANSPORT ACCOUNT (6)

Dr                                                                                                                                                Cr
Date	Particulars	Folio	Amount	Date	Particulars	Folio	Amount
March. 19 April. 1	Cash   Balance	b/d	3,500	March. 31	Balance	c/d	3,500
			3,500				3,500
			3,500

 

INSURANCE ACCOUNT (7)

Dr                                                                                                                                                Cr
Date	Particulars	Folio	Amount	Date	Particulars	Folio	Amount
March. 13 April. 1	Cash   Balance	b/d	5,000	March. 31	Balance	c/d	5,000
			5,000				5,000
			5,000

 

MRS. WAKA’S TRIAL BALANCE AS AT 31^ST MARCH

Name of account	Dr	Cr
Cash Capital Purchases Sales Packing materials Transport Insurance	275,000   120,000   5,000 3,500 6,000	260,000   150,000
	410,000	410,000

 

Nyeneu Rahabu Peter