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 |
