Summarizing (Trial Balance)

(Go through the reference books for details)

 What is Trial Balance (Kieso, 6th ed., p. 64)
A Trial Balance is a list of accounts and their balances at a given time. A Trial Balance is prepared at
the end of an accounting period. The accounts are listed in the order in which they appear in the
ledger. Debit balances are listed in the left column and credit balances in the right column. According
to Meigs and Meigs, “The proof of the equality of debit and credit balances of all accounts is called a
Trial Balance.
 Purposes of Trial Balance (Kieso, 6th ed., p.)
The primary purpose of a trial balance is to prove that the debits equal the credits after posting. The
sum of the debit account balances in the trial balance should equal the sum of the credit account
balances. Trial Balance is useful in the preparation of Financial Statements also. It is the summarizing
step of accounting cycle.
 Errors that can not be detected by Trial Balance (Kieso, 6th ed., p.65, Monir, No. 2.32 )
1. Errors of Omission: If a transaction is omitted completely to record i.e. a transaction is not
journalized then this error cannot be located by Trial Balance. For example, Sales Tk. 50,000 is
not journalized.

2. Errors of Writing: These types of errors are made by clerk in recording transactions. Suppose,
furniture purchase Tk. 5,00,000 is recorded in the journal as Tk. 50,000 in both side.
3. Errors of Principle: If a revenue type transaction is treated, in recording, as capital type then this
error is known as error of principle. Such as, Repairs of Machinery Tk. 500 is recorded in
Machinery A/c Dr Tk. 500 then this error is called error of principle.
4. Compensation Errors: If one error is compensated by one or more errors is called compensation
errors i.e. offsetting errors are made in recording the amount of a transaction. For example,
Supplies value is understated by Tk. 500 and Accounts Receivable is overstated by Tk. 500, then
trial balance will agree and this error cannot be located by trial balance.

5. Errors of Misposting: If a account is transfer from journal to ledger in wrong account in right
side in right amount then this error cannot be located by trial balance i.e. a journal entry is not
posted correctly. Cash received Tk. 25,000 is collected from Mr. X and credited to Mr. Y A/c by
Tk. 25,000 then trial balance will agree and error will not detect by trial balance.

6. Errors of Duplication: If a journal entry is posted twice then this error will not detect by trial
balance.

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 Preparation of Trial Balance (Kieso, 6th ed., p. )
Problem 1
The accounts in the ledger of Speedy Delivery Service contain the following balance on July
31, 1999.

Account Title Taka Account Title Taka

Accounts receivable 7642 Retained earning 4636

Accounts payable 7396 Gas and Oil expense 758

Cash 13767 Insurance expense 523

Delivery equipment 49360 Notes payable 18057

Common stock 40000 Prepaid insurance 2036

Wages expense 4228 Prepaid Rent 1900

Wages payable 815 Service revenue 8610

Interest Revenue 700

Prepare a trial balance

Solution to Problem-1

Speedy Delivery Service

Trial Balance
July 31, 1999

Account Title Debit Credit

Tk. Tk.

Accounts receivable 7642

Accounts payable 7396

Cash 13767

Delivery equipment 49360

Common stock 40000

Wages expense 4228

Page 2 of 4
 Wages payable 815

Retained earning 4636

Gas and Oil expense 758

Insurance expense 523

Notes payable 18057

Prepaid insurance 2036

Prepaid Rent 1900

Service revenue 8610

Interest Revenue 700

Total 80214 80214

Problem 2

The account balances of the Pinewood Service Company on December 31, 2003 is shown
below:

Amount

Taka

Cash 650

Note Payable 5000

Emmy, Capital 3066

Prepaid Insurance 432

Accounts Payable 931

Supplies 1320

Land 1200

Unearned Rent Revenue 1020

Building 5000

Accumulated Depreciation-Building 1,000

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 Equipment 13000

Accumulated Depreciation-Equipment 5200

Emmy, Drawing 3100

Rent Revenue 16196

Salaries Expense 7060

Interest Expense 350

Miscellaneous Expenses 301

Prepare a Trial Balance

Problem 3
The following are the balances of Pioneer Advertising Agency on October 31, 1999. Prepare
a Trial Balance

Accounts Title Taka

Cash 15200

C.R. Buyer, Capital 10000

Rent Expense 900

Advertising supplies 2500

Notes Payable 5000

Prepaid Insurance 600

Fees Earned 10000

Accounts Payable 2500

Office Equipment 5000

Salaries Expense 4000

Unearned Fees 1200

C.R. Buyer, Drawing 500

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Problem 4
The following list of accounts and their balances are given for preparing a Trial Balance of
Tammy’s Equipment Rentals at December 31, 2003, the end of the annual accounting period.

Accounts Title Taka

Emmy, Capital 30660

Rent Revenue 161960

Cash 6500

Unearned Rent Revenue 10200

Prepaid Insurance 4320

Supplies 13200

Accounts Payable 9310

Building 50000

Equipment 130000

Accumulated Depreciation-Building 10000

Land 12000

Accumulated Depreciation-Equipment 52000

Emmy, Drawing 31000

Interest Expense 3500

Note Payable 50000

Salaries Expense 70600

Miscellaneous Expenses 3010

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Problem 5
December 31, 2001, the following balances are available of Farheen International Inc.
Prepare a Trial Balance.

Account Heading Tk.

Capital 20930

Cash 2425

Accounts Receivable 5,000

Accounts payable 925

Unearned fees 1250

Supplies 1870

Prepaid Insurance 620

Office Equipment 32650

Accumulated depreciation 9700

Drawing 10200

Fees earned 39125

Wage expenses` 12415

Rent expenses 3600

Utilities expenses 2715

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