TRIAL BALANCE.
Hey Guyz, Happy Tuesday. How was Monday for you,
well for me it was all school stuff but it was fun, hope it was at least
enjoyable for you? It is well with you today in Jesus Mighty Name- Amen. So
today we are back to Acc. 101 and a new topic I pray you will enjoy, let’s get
started.
Trial
Balance is a statement showing the list of balance in a
double entry form, extracted from the ledger to show the arithmetic accuracy of
the account. The Trial Balance is drawn up at a given date after all the
posting have been made in the ledger and they must both be in agreement. When
they is a difference between the two sides (i.e. The Credit & Debit Sides),
then some errors have occurred.
THINGS
TO NOTE ABOUT TRIAL BALANCE:
1. All
Assets must be put in the Debit Side.
2. All
Income must be put in the Credit Side.
3. All
Expenses must be recorded in the Debit Side.
4. All
items with debit balance in the ledger will be debited.
6. Trial
Balance has column for Particulars, Debit and Credit Sides.
USES
OF TRIAL BALANCE:
1. It
is used to test the arithmetic accuracy of the double entry.
2. It
helps to prepare the Financial Statement.
ERRORS
NOT DISCLOSED BY THE TRIAL BALANCE
1. Error of Original
Entries- This occurs when a wrong amount is
entered in the debit and credit sides of the accounts. For example- Sales of N 110 to Mr. Ayo entered in the account as
N 210.
2. Error of Omission-
This occurs when a Transaction is totally omitted from the debit and credit
side of the account.
3. Error of Commission-
This occurs when a Transaction is entered in the wrong person’s account. For
example- Purchases of Goods of N 700
from Ms. Sophie was entered in Mr. Chuks account.
4. Error of Principle-
This occurs when a Transaction is entered in a wrong class of account. For
example- Payment of N 6000 for Motor
Expenses was entered in motor van account.
5. Error of Compensating-
This occurs when errors of the same amount are posted to the two sides of the
ledger; therefore they cancel out each other.
6. Complete Reversal of
Entries- This occurs when a double entry of a
Transaction is reversed, the account to be debited has been credited and the
account that ought to be credited is debited.
ILLUSTRATION:
From the Balances of
Sharon Enterprises, Prepare the Trial Balance for the year 31st Dec.
1993.
Capital
9,000
Sundry Expenses 300
Bills Receivable 5,000
Creditor
10,000
Returns Inward 2,130
Returns Outwards 1,250
Furniture &
Fittings
33,361
Freehold Property 40,000
Carriage Outwards 152
Bad Debts
68
Cash 18,000
Bank Overdraft
7,000
Purchases
171,000
Sales
250,000
Drawings
3,260
Discounts Received 254
Discounts Allowed 839
Provision for Doubtful
Debts 730
Rent 156
Bills
Payable
3,752
Debtors
8,000
Carriage
Inwards
1,110
Accumulated Depreciation-Furniture 1,700
Advertising
150
General
Expenses 160
You are required to extract the Trial Balance.
SOLUTION.
Particulars
|
Dr
|
Cr
|
Capital
|
9,000
|
|
Sundry
|
300
|
|
Bills Receivable
|
5,000
|
|
Creditor
|
10,000
|
|
Returns Inwards
|
2,130
|
|
Returns Outwards
|
1,250
|
|
Furniture & Fittings
|
33,361
|
|
Freehold Property
|
40,000
|
|
Carriage outwards
|
152
|
|
Bad Debts
|
68
|
|
Cash
|
18,000
|
|
Bank Overdraft
|
7,000
|
|
Purchases
|
171,000
|
|
Sales
|
250,000
|
|
Drawings
|
3,260
|
|
Discounts Received
|
254
|
|
Discounts Allowed
|
839
|
|
Prov. for Doubtful Debt
|
730
|
|
Rent
|
156
|
|
Bills Payable
|
3,752
|
|
Debtor
|
8,000
|
|
Carriage Inwards
|
1,110
|
|
Accumu. Dep.-Furniture
|
1,700
|
|
Advertising
|
150
|
|
General Expenses
|
160
|
|
283,686
|
283,686
|
This concludes our session for today. Hope you understood
what we discussed today? For your questions, send me a msg- dividiamond@gmail.com
and pls leave your comments on what you think of the session we just had.
Until we meet again, remain ever blessed and
remember you are for SIGNS & WONDERS. God Bless You.
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