FINANCIAL ACC 101

TRIAL BALANCE

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Trial Balance is a statement showing a 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. The Techniques ensure that debit and credit balances as displayed in the ledger are complied, that is they must be in agreement and be equal. When they is a difference between the two sides, then some errors have been made.

Uses of Trial Balance:

1. All assets must be put in debit side.

2. All liabilities must be put on the credit side.

3. All income must be recorded on the credit side.

4. All expenses must be recorded on the debit side.

5. All items with debit balance in ledger will be debited.

6. All items with credit balance in ledger will be credited.

7. Total debit must be equal to total credit.

8. Trial Balance has column for particulars, debit side and credit side.

SOME ERRORS THAT CAN OCCUR IN TRIAL BALANCE:

1. Error of Original Entries- This occurs when a wrong amount is entered in the debit and credit side. For Example- Sales of N101 to Ayo must be entered in the account as N201.

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 a wrong person's account. For Example- Purchases of Goods of N70 from Martin was entered in Michael's Account.

4. Error of Principle- This occurs when transaction on are entered in a wrong class of account. For Example- Payment of N60 for Motor Expenses was entered in Motor Van Account.

5. Compensating Error- 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 amount that ought to be credited is debited.

ILLUSTRATION 1:

From the Balances of Segun Enterprises, prepare the Trial Balance for the year 1992.

Capital                                                                                                                       N9, 000

Sundry Expenses                                                                                                       N300

Bills Receivable                                                                                                         N5, 000

Creditors                                                                                                                   N10, 000

Returns Inward                                                                                                         N2, 130

Returns Outward                                                                                                      N1, 250

Furniture & Fittings                                                                                                 N33, 361

Freehold Property                                                                                                   N40, 000

Carriage Outwards                                                                                                       N152

Bad Debts                                                                                                                     N68

Cash                                                                                                                           N18, 000

Bank Overdraft                                                                                                         N7, 000

Purchases                                                                                                                  N171, 000

Sales                                                                                                                            N250, 000

Drawings                                                                                                                     N3, 260

Discounts Received                                                                                                      N254

Discounts Allowed                                                                                                        N839

Provision for Doubtful Debts                                                                                        N730

Rent                                                                                                                                  N156

Bills Payable                                                                                                                   N3, 752

Debtors                                                                                                                            N8, 000

Carriage Inwards                                                                                                             N1, 110

Accumulated Depreciation- Furniture                                                                           N1, 700

Advertising                                                                                                                         N150

General Expenses                                                                                                              N160

SOLUTION:

Particulars	DR	CR
Capital		N9, 000
Sundry Expenses	N300
Bills Receivable	N5, 000
Creditors		N10, 000
Returns Inwards	N2, 130
Returns Outwards		N1, 250
Furniture & Fittings	N33, 361
Freehold Property	N40, 000
Carriage Inwards	N1, 110
Carriage Outwards	N152
Bad debts	N68
Cash	N18, 000
Bank Overdraft		N7, 000
Purchases	N171, 000
Sales		N250, 000
Drawings	N3, 260
Discounts Received		N254
Discount Allowed	N839
Provision of doubtful debts		N730
Rent	N156
Bills Payable		N3, 752
Debtors	N8, 000
Advertising	N150
General Expenses	N160
Accumulated Depreciation-Furniture		N1, 700
	N283, 686	N283, 686

This brings us to the end of Today's Session. Hope this was very helpful to you, leave a comment of what you think of this Tutorial and of your Questions below. Have a Blessed Day and Remember You are Amazing. God Bless You.