Trial balance ppt

Trial balance ppt

• 2.
  MEANING AND DEFINITION Atrial balance is a bookkeeping worksheet in which the balance of all ledgers are compiled into debit and credit account column totals that are equal. A Trail Balance is the list of debit and credit balances, taken out from ledger it also include the balance of cash and bank taken from the cash book. - Carter
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  FEATURES OF TRIALBALANCE 1. It includes balance of all ledger accounts and cash book. 2. It is not a part of ledger account, it is a statement. 3. It is prepared to test the arithmetic accuracy of ledger account. 4. It can be prepared at any date on which accounts are closed and balanced. But it is usually prepared at the end of the accounting year.
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  OBJECTIVES OF TRIALBALANCE 1. It ensures that the posting from the ledgers is done correctly. If there are any arithmetic errors in the accounting then this will get reflected in the trial balance. And we can determine this when the total of the debit column and the credit column do not match. 2. Trial balance will also help in the preparation of the final accounts. The balances for the financial statements are taken from the trial balance. Contd.
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  3. It willalso detect clerical errors, like a fault in posting, mixing up of figures, etc. 4. the trial balance will also serve as a useful summary of all accounting records. It is a summary of all the ledger accounts of a firm.
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  PREPARATION OF TRIALBALANCE 1 .Prepare on a fixed date . It is headed as Trial balance as on … 2. It has five columns –  Serial number  Particular - It contain name of various accounts.  Ledger folio – It is written against each amount to ensure from where the balance of ledger account has been taken.  Debit amount – All accounts having debit balance are recorded.  Credit amount – All account having credit balance are recorded. 3. There is not set order of mentioning accounts.
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  FORMAT OF TRIALBALANCE Company name Trail Balance as at ………… S. No. Particulars L.F Dr. amount Cr. amount Total
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  RULES FOR PREPARATIONOF TRIAL BALANCE While preparation of trial balances we must take care of the following rules/points 1] The balances of the following accounts are always found on the debit column of the trial balance -Assets -Expense Accounts -Drawings Account -Cash Balance -Bank Balance -Any losses Contd
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  2] And thefollowing balances are placed on the credit column of the trial balance -Liabilities -Income Accounts -Capital Account -Profits 3] Closing stock is usually not shown in Trail Balance. It is shown below the trial balance as an additional information. It represent the unsold stock out of total opening stock and purchase. However it can appear in trial balance by making adjustment in purchase by passing following entry. Closing stock A/C Dr. To Purchase A/C
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  METHODS OF PREPARINGTRIAL BALANCE It can be prepared in two ways- (1) Balance Method – Under this method, all the ledger accounts including cash book are balanced and only the accounts having debit or credit balances are recorded in trial balance ignoring the accounts having no balance . (2) Total Amount Method – Under this method, total of each side of account is recorded in Trail Balance.
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  PREPARE A TRIALBALANCE FROM THE FOLLOWING BALANCE EXTRACTED FROM THE BOOKS OF MOHAN LAL AND SONS ON 31ST MARCH 2020. Opening stock Purchase Sales Purchase return Sales return Capital Drawing Loan from ram Wages Salaries Plant and machinery Debtors Creditors Discount (Dr.) Bills Receivable Cash Bank Overdraft Furniture Rs. 28500 45000 65400 800 1000 100000 4000 20000 1000 10000 14200 42000 22000 12000 500 10000 9000 4000 15000
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  Trial Balance as on31st March, 2019 S. No Particulars L.F Dr. Amount (Rs.) Cr. Amount (Rs.) 1. Opening Stock 28500 2. Purchase 45000 3. Sales 65400 4. Purchase Return 800 5. Sales Return 1000 6. Capital 100000 7. Drawing 4000 8. Loan from Ram 20000 9. Interest on loan 1000 10. Wages 10000 11. Salaries 14200 12. Plant & Machinery 42000 13. Debtors 22000 14. Creditors 12000 15. Discount 500 16. Bill Receivable 10000 202200 202200
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  IS THE AGREEMENTOF TRIAL BALANCE A CONCLUSIVE PROOF OF ACCURACY ? Through the trial balance helps to show the arithmetic accuracy of the book of accounts, it is possible only when the account has not committed any error. Out of the errors made, only certain errors can be disclosed by the disagreement of trial balance, and even the trial balance may agree without disclosing certain errors made. Hence, the trial balance, is not regarded as conclusive proof of correctness of books of accounts maintained.
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  ERRORS 1. Error ofOmission – It this a transaction happened but was not recorded in the books of accounts 2. Error of Principle – Here accounting entries recorded in the incorrect account. 3. Error of Commission - Its is an error that occurs when entries are recorded in debit or credit to the correct account but to the wrong subsidiary account or ledger. 4. Compensating error - A compensating error is an accounting error that offsets another accounting error. For example, the wages expense could be too high by Rs.2,000 due to one error, while the cost of goods sold could be too low by Rs.2,000 due to a compensating error.
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  DIFFERENCE IN TRIALBALANCE Very often two side of trial balance do not tally. It may result due to following mistake -  An item omitted to be posted into ledger from subsidiary books.  Posting of wrong amount to ledger.  Posting an amount to the wrong side of ledger account.  Wrong addition or balancing of ledger accounts.  Wrong totaling of subsidiary books.  An item in the subsidiary book posted twice in the ledger account.  Balance of some account to be written on the wrong side of trial balance.  An error in totaling of trial balance.
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  SUSPENSE ACCOUNT If allthe efforts made to locate the errors, fail, trial balance may be temporarily be balanced by transferring the amount to suspense account. Suspense account be put at shorter side e.g. If credit total is higher, suspense account will have debit balance and if debit total is higher, suspense account will have credit balance.