LEDGER AND TRIAL BALANCE

Normally after every month or whenever a businessman is interested in knowing the position of various A/cs, the accounts are balanced. Various steps for this purpose are

1. Debit and Credit sides of each A/c are totalled.
2. The difference between the two sides is inserted on the side which is shorter so as to make their totals equal.
3. The words “Balance C/d” i.e. the balance carried down and written against the amount of difference.
4. In the next period, the balance is brought down on the other side by writing the words ‘Balance b/d’.
5. If the Debit side exceeds the Credit Side the difference is a Debit Balance where as.
6. If the Credit side exceeds the Debit side the difference is a Credit Balance.

Important

1. Debit Balance of a Personal A/c means the person is a Debtor of the firm whereas Credit Balance of a Personal A/c indicates that the person is a Creditor of the firm.
2. Real A/cs (which include Cash and all other Assets A/cs) will usually show Debit Balances.
3. Nominal A/cs (A/cs of Income and Expenses) are transferred to Trading and Profit and Loss A/c of the firm at the end of the Accounting Period.
4. Debit Balance of any A/c means an Asset or an Expense whereas Credit Balance means a liability, Capital or Income earned.

TRIAL BALANCE

I Meaning – When posting of all the transactions into the Ledger is completed and accounts are balanced off, then the balance of each account is put on a list called Trial Balance.

II Definition – Trial Balance is the list of debit and credit balances taken out from ledger. “It also includes the balances of Cash and bank taken from the Cash Book”.

lll Preparation – Steps (Only Balance Method)

1. Ledger A/cs which shows a debit balance is put on the Debit side of the trial balance.
2. The A/c Showing credit balance is put on the Credit side of Trial Balance.
3. Accounts which shows no balance i.e. whose Debit and Credit totals are equal are not entered in Trial Balance.
4. Then the two sides of the Trial Balance are totalled. If they are equal it is assumed that these is atteast no arithmetical error in the posting and balancing of

Objectives or Functions of Trial Balance

• It helps in ascertaining the arithmatic accuracy of ledger accounts.
• Helps in locating errors.
• Provides the summary of Ledger A/cs.
• Helps in the prepartion of Final A/cs.

Recording in the journal and subsidi ary Books, Posting into the Ledger and Preparation of Trial Balance can be clearly understood with the help of the example given on next pages.

Problem : Enter the following transactions in proper Subsidiary Books, post them into Ledger Accounts, balance the accounts and prepare a Trial Balance.

2011

June 1. Assets : Cash in hand Rs. 20,000; Debtors : Amit and Co. Rs. 15,000, Sumit Bros. Rs. 30,000, Stock Rs. 1,75,000, Machinery Rs. 1,20,000, Furniture Rs. 40,000.

Liabilities : Bank overdraft Rs. 33,000, Creditors : Virat and Co. Rs. 24,000, Vishal Rs. 16,000.

June 2        Purchased from Ramesh and Sons goods of the list price of Rs. 20,000 at 10% trade discount.

June 5        Returned to Ramesh & Sons goods of the list price of Rs. 2,000.

June 10      Issued a cheque to Ramesh and Sons in full settlement of their account.

June 12      Sold to Amit and Co., goods worth Rs. 25,000.

June 15      Received cash Rs. 10,000 and a cheque for Rs. 8,000 from Amit and Co. The cheque was immediately deposited into the bank.

June 16      Withdraw for personal use cash Rs. 5,000 and goods for Rs. 3,000.

June 17      Accepted a bill for 45 days drawn by Virat and Co. for the amount due to him.

June 18      Acceptance received from Sumit Bros. for the amount due from thempayable after 30 days.

June 19      Sold to Mohit Bros., goods for Rs. 16,000.

June 20      Cash purchases Rs. 15,000.

June 22      Withdraw from bank for office use Rs. 10,000.

June 23      Purchased from Vishal goods valued Rs. 24,000.

June 24      Amit and Co. returned goods worth Rs. 2,000.

June 25      Received from Mohit Bros. Rs. 10,000.

June 27      Accepted a bill for Rs. 25,000 for 1 month draw by Vishal.

June 27.     Paid by cheque, Rent Rs. 2,800

June 27      Received Commission in Cash Rs. 800

June 30      Paid salaries Rs. 5,000.

 

CBSE Accountancy Class XI ( By Mr. Aniruddh Maheshwari ) 
Email Id : [email protected]