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Chapter-5 Trial Balance

Trial Balance is a statement, prepared with the debit and credit balances of the Ledger Accounts to test the arithmetical accuracy
of the books.

“A Trial Balance is the list of debit and credit balances, taken out from the Ledger. It also includes the balances of cash and bank
taken from the Cash Book.”

Characteristic or Features of Trial Balance:

1. It is a list of balances of Ledger Accounts and Cash Book.
2. It is not a part of the Double Entry System of Book Keeping. It is a result of Double Entry System of Book Keeping. It is only a
working paper.
3. It can be prepared on any date if the accounts are balanced.
4. It verifies the arithmetical correctness of posting of entries from the Journal to the Ledger.
5. It is not a conclusive proof of the accuracy of the books of account since some errors are not disclosed by the Trial Balance, for
example, error of principle and compensating errors are not shown (disclosed) by Trial Balance.
6. It is helpful in preparation of Trading Account, Profit and Loss Account and the Balance Sheet.

Objectives or Functions of Trial Balance:

1. To Ascertain the Arithmetical Correctness of Ledger Accounts.
2. To Help Prepare the Final Accounts.
3. Summary of Each Account.
4.To Help in Locating Errors.

Limitations of Trial Balance:- Trial Balance is not a conclusive proof of the absolute accuracy of the books of accounts. If
the Trial Balance agrees, it does not mean that there are no errors in the books of account.
Thus, the limitations of a Trial Balance are:
1. Error of Principal i.e., errors which arise due to incorrect application of the principle of accounting are not disclosed by the Trial
Balance.
2. Compensating Errors i.e., group of errors which are committed in such a way that one mistake is compensated by the other
and the Trial Balance still agrees.
3. Transactions completely omitted from recording in the books of account cannot be detected.
4. Recording both aspects of a transaction twice in the books of account.
5. Posting correct amount on the correct side but in wrong account is not reflected by the Trial Balance.
6. Wrong amount recorded in the books of original entry and same amount is debited and credited, is not brought out by the
Trial Balance.
Always Remember for Preparing a Trial Balance.
1. Trial Balance is prepared with the help of ledger and Cash Book.
2. While preparing a Trial Balance all accounts i.e., Asset, Liability, Capital, Expense and Revenue Accounts are considered. These
Ledger Accounts except cash and bank balances are taken from the Cash Book.
3. Cash and Bank balances are taken from the Cash Book.
4. If an account does not have a balance, it is ignored, i.e., is not written in Trial Balance.
5. Ledger Accounts showing debit balances are shown in the debit column for amount of a Trial Balance and the Ledger Accounts
showing credit balances are shown in the credit column for amount of a Trial Balance.
6. Purchases Account always has a debit balance which is shown in the debit column of a Trial Balance.
7. Sales Account always has a credit balance which is shown in the credit column of a Trial Balance.
8. Return Inward Account or Sale Return Account always has a Debit Balance which is shown in the debit column of a Trial Balance.
9. Return Outward Account or Purchases Return Account has a Credit Balance which is shown in the credit column of a Trial Balance.
10. Input GST (CGST, SGST and IGST) accounts always have a debit balance. Hence, are shown in the debit column of the Trial Balance.
11. Output GST (CGST, SGST and IGST) accounts always have a credit balance. Hence, are shown in the credit column of the Trial
Balance.
12. Opening Stock Account has a Debit Balance which is Debit Column of the Trial Balance.
13 Generally Closing Stock does not Appear in the Trial Balance.

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14. Accounts of assets such as Plant & Machinery, Furniture and Fixtures, Land and Building, Motor Car, Bills Receivable, Goodwill,
Trademark, Patents and Copyright, Cash in Hand, etc. have debit balance and are shown in the debit column of a Trial Balance.
15. Bank Balance maybe debit or credit. If Bank has Debit Balance, it is shown in the debit column of a Trial Balance. If it has
credit balance, it is shown in the credit column of a Trial Balance.
16. Accounts of Income and Gains have credit balance and are shown in the credit column of a Trial Balance.
17. Accounts of Expense and losses have debit balance and are shown in the debit column of a Trial Balance.

Practical Questions:-

Question.1 From the following transactions, pass necessary journal entries in the book of COC EDUCATION , Post them into their
ledger and prepare a Trial Balance.

NOTE: solve this question after studying chapter “accounting for GST”

Date Particulars ₹
2022
1 April COC EDUCATION started business with cash 80,000
2April Purchased goods for ₹ 25,000 plus CGST and SGST @ 6% each
5 April Sold goods for ₹ 30,000 plus CGST and SGST @ 6% each
6 April Purchased goods from Surya of ₹ 18,000 plus IGST @ 12%
8 April Sold goods to Ram for ₹ 20,000 plus CGST and SGST @ 6% each.
10 April Cash paid to Surya 20,160
15 April Cash received from Ram 22,400
18 April Purchased goods for cash from Surya for ₹ 19,000 plus CGST and SGST @ 6% each
20 April Withdrew for personal use 1,500
24 April Purchased goods from Dev for ₹ 17,000 plus IGST @ 12%
28 April Cash paid to Dev. 18,500
Discount allowed by him. 540
30 April Paid salaries 2,000
Solution: In the Books of COC EDUCATION
Journal Entry
Date Particular L.F Dr. Cr.
2022
1 April Cash A/c Dr. 80,000
To. Capital A/c 80,000
(Being the business started)

2 April Purchased A/c Dr. 25,000

Input CGST A/c Dr. 1,500
Input SGST A/c Dr. 1,500
To. Cash A/c 28,000
(Being the goods purchased for cash)
5 April Cash A/c Dr. 33,600
To. Sales A/c 30,000
To. Output CGST A/c 1,800
To. Output SGST A/c 1,800
(Being Sale of goods for cash)
6 April Purchases A/c Dr. 18,000
Input IGST Dr. 2,160
To. Surya 20,160
(Being the purchases of goods from Surya)
8 April Ram Dr. 22,400
To. Sales A/c 20,000
To. Output CGST A/c 1,200
To. Output SGST 1,200
(Being goods sold to Ram on credit)
10 April Surya Dr. 20,160
To. Cash A/c 20,160
(Being cash paid to Surya)

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15 April Cash A/c Dr. 22,400

To. Ram 22,400
(Being Cash received from Ram)

18 April Purchases A/c Dr. 19,000

Input CGST A/c Dr. 1,140
Input SGST A/c Dr. 1,140
To. Cash A/c 21,280
(Being purchase of goods for cash)
20 April Drawing A/c Dr. 1,500
To. Cash A/c 1,500
(Being cash withdrawn)
24 April Purchases A/c Dr. 17,000
Input IGST A//c Dr. 2,040
To. Dev 19,040
(Being the goods purchased from Dev)
28 April Dev Dr. 19,040
To. Cash A/c 18,500
To. Discount Received A/c 540
(Being the cash paid to dev and he allowed discount of ₹ 540)
30 April Salaries Dr. 2,000
To. Cash A/c 2,000
(Being the salaries paid)

Cash Account
Date Particular J.F ₹ Date Particular J.F ₹
1 April To. Capital A/c 80,000 2 April By. Purchases A/c 25,000
5 April To. Sales A/c 30,000 2 April By. Input CGST A/c 1,500
5 April To. Output CGST A/c 1,800 2 April By. Input SGST A/c 1,500
5 April To. Output SGST A/c 1,800 10 April By. Surya A/c 20,160
15 April To. Ram 22,400 18 April By. Purchases A/c 19,000
18 April By. Input CGST A/c 1,140
18 April By. Input SGST A/c 1,140
20 April By. Drawing A/c 1,500
28 April By. Dev 18,500
30 April By. Salaries A/c 2,000
30 April By. Balance c/d 44,560
1,36,000 1,36,000

1 May To. Balance b/d 44,560

Capital Account
Date Particular J.F ₹ Date Particular J.F ₹
30 April To. Balance c/d 80,000 1 April By. Cash A/c 80,000

1 May By. Balance b/d 80,000

Purchases Account
Date Particular J.F ₹ Date Particular J.F ₹
2 April To. Cash A/c 25,000 30 April By. Balance c/d 79,000
6 April To. Surya 18,000
18 April To. Cash A/c 19,000
24 April To. Dev 17,000
79,000 79,000

1 May To. Balance b/d 79,000

Sales Account
Date Particular J.F ₹ Date Particular J.F ₹
30 April To. Balance c/d (b/f) 50,000 5 April By Cash A/c 30,000
8 April By. Ramesh A/c 20,000
50,000 50,000

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Surya Account
Date Particular J.F ₹ Date Particular J.F ₹
10 April To. Cash A/c 20,160 6 April By. Purchases A/c 18,000
6 April By. Input IGST A/c 2,160
20,160 20,160

Ram Account
Date Particular J.F ₹ Date Particular J.F ₹
8 April To. Sales A/c 20,000 15 April By Cash A/c 22,400
8 April To. Output CGST A/c 1,200
8 April To. Output SGST A/c 1,200
22,400 22,400
Drawing Account
Date Particular J.F ₹ Date Particular J.F ₹
20 April To Cash A/c 1,500 30 April By Balance c/d 1,500
1,500 1,500
Dev account
Date Particular J.F ₹ Date Particular J.F ₹
28 April To Cash A/c 18,500 24 April By Purchases A/c 17,000
28 April To Discount Received A/c 540 24 April By Input IGST A/c 2,040
19,040 19,040

Discount Received Account

Date Particular J.F ₹ Date Particular J.F ₹
30 April To Balance c/d 540 28 April By Dev A/c 540
540 540

Salaries Account
Date Particular J.F ₹ Date Particular J.F ₹
30 April To Cash A/c 2,000 30 April By Balance c/d 2,000
2,000 2,000

Input CGST Account

Date Particular J.F ₹ Date Particular J.F ₹
2 April To Cash A/c 1,500 30 April By Balance c/d 2,640
18 April To Cash A/c 1,140
2,640 2,640

Input SGST Account

Date Particular J.F ₹ Date Particular J.F ₹
2 April To Cash A/c 1,500 30 April By Balance c/d 2,640
18 April To Cash A/c 1,140
2,640 2,640

Input IGST Account

Date Particular J.F ₹ Date Particular J.F ₹
6 April To Surya 2,160 30 April By Balance c/d 4,200
24 April To Dev 2,040
4,200 4,200

Output CGST Account

Date Particular J.F ₹ Date Particular J.F ₹
30 April To Balance c/d 3,000 5 April By Cash 1,800
6 April By Ram 1,200
3,000 3,000
Output SGST Account
Date Particular J.F ₹ Date Particular J.F ₹
30 April To Balance c/d 3,000 5 April By Cash 1,800
6 April By Ram 1,200
3,000 3,000
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Trial Balance of COC EDUCATION As on 30th April, 2022

Heads of Accounts L.F Debit Balance Credit Balance
Capital A/c 80,000
Cash A/c 44,560
Purchases A/c 79,000
Sales A/c 50,000
Drawings A/c 1,500
Discount Received A/c 540
Salaries A/c 2,000
Input CGST A/c 2,640
Input SGST A/c 2,640
Input IGST A/c 4,200
Output CGST A/c 3,000
Output SGST A/c 3,000
Total 1,36,540 1,36,540

Notes
1. At the end of the year balance of Purchases A/c will be transferred to the debit of Trading A/c and balance of sales A/c will
be transferred to the credit of Trading A/c.
2. Balance of Salaries A/c will be transferred to the debit of Profit and Loss A/c and balance of discount received A/c will be
transferred to the credit of Profit and Loss A/c.
At the time of preparing final accounts nominal accounts (e.g., Purchases A/c, Sales A/c, Discount Received A/c and Salaries
A/c) are closed by transferring their balances to Trading and Profit and Loss A/c.

Question:2 Prepare a Trial Balance

Capital A/c.......................................................................................................................... .............................................20,000
Debtors A/c........................................................................................................................................................................3,000
Fixed Assets A/c............................................................................................................................. .................................19,200
Sales A/c...........................................................................................................................................................................11,000
Return Outward A/c................................................................................................................................................. .............100
Bills Payable A/c..................................................................................................................................................................800
Bank Overdraft A/c............................................................................................................................. ...............................1,100
Opening Stock A/c............................................................................................................................. ................................1,500
Creditors A/c......................................................................................................................................................................3,000
Purchases A/c............................................................................................................................. ........................................7,000
Return Inward A/c................................................................................................................................................................200
Wages & Salaries A/c...................................................................................................................................................... ..3,000
Bills Receivable A/c...........................................................................................................................................................1,500
Rent A/c..................................................................................................................... ............................................................600

Solution: 2 Trial Balance

Heads of Accounts L.F Debit Balance Credit Balance
Capital A/c 20,000
Debtors A/c 3,000
Fixed Assets A/c 19,200
Sales A/c 11,000
Return Outward A/c 100
Bills Payable A/c 800
Bank Overdraft A/c 1,100
Opening Stock A/c 1,500
Creditors A/c 3,000
Purchases A/c 7,000
Return Inward A/c 200
Wages & Salaries A/c 3,000
Bills Receivable A/c 1,500
Rent A/c 600
Total 36,000 36,000

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Question: 3 Draw up a Trial Balance in the books of Rahuldas as on 31st March, 2023.
Capital A/c...................................................................................................................................................................1,40,000
Purchases A/c.................................................................................................................................................................36,000
Discount Allowed A/c.......................................................................................................................................................1,200
Carriage Inward A/c.........................................................................................................................................................8,700
Carriage Outward A/c.......................................................................................................................................................2,300
Sales A/c.........................................................................................................................................................................60,000
Return Inward A/c...............................................................................................................................................................300
Return outward A/c............................................................................................................................................................700
Rent and Taxes A/c............................................................................................................................................................1200 Plant
& Machinery A/c...................................................................................................................................................80,700
Stock on 1st April,2019....................................................................................................................................................15,500
Sundry Debtors..............................................................................................................................................................20,200
Sundry Creditor..............................................................................................................................................................12,000
Investments......................................................................................................................................................................3,600
Commission Received.......................................................................................................................................................1,800
Cash in Hand........................................................................................................................................................................100
Cash at Bank...................................................................................................................................................................10,100
Motorcycle......................................................................................................................................................................34,600
Stock on 31st March,2020 (not adjusted).........................................................................................................................20,500
Solution: 3
Trial Balance as on 31st March, 2023
Heads of Accounts L.F Debit Balance Credit Balance
Capital A/c 1,40,000
Purchases A/c 36,000
Discount Allowed A/c 1,200
Carriage Inward 8,700
Carriage Outward 2,300
Sales 60,000
Return Inward 300
Return Outward 700
Rent & Taxes 1,200
Plant & Machinery 80,700
Stock (1st April,2019) 15,500
Sundry Debtors 20,200
Sundry Creditors 12,000
Investment 3,600
Commission Received 1,800
Cash in Hand 100
Cash at Bank 10,100
Motorcycle 34,600
Total 2,14,500 2,14,500

Note: Closing Stock will not be taken in the Trial Balance because it represents a part of the goods purchased but not yet sold.
As the total purchases have been included in the Trial Balance, there is no need of including Closing Stock again. If closing
stock is adjusted against purchases, then only closing stock is shown in the Trial Balance.

Question: 4 The following Trial Balance is drawn from the books of COC Education as on 31-3-2023.
Trial Balance As on...
Debit Balance ₹ Credit Balance ₹
Building 60,000 Capital 73,600
Machinery 17,000 Fixture 5,600
Return Outward 2,600 Sales 1,04,000
Bad Debts 2,800 Debtors 60,000
Cash 400 Interest Received 2,600
Discount Received 3,000
Bank Overdraft 10,000
Creditors 50,000
Purchases 1,00,000

2,45,800 2,45,800

You are required to comment whether it is correct or not. If this Trial Balance is not correct, draw the correct one.

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Solution: 4 Redrafted Trial Balance as on...

Debit Balance ₹ Credit Balance ₹
Building 60,000 Capital 73,600
Machinery 17,000 Sales 1,04,000
Fixtures 5,600 Creditors 50,000
Debtors 60,000 Bank Overdraft 10,000
Bad Debts 2,800 Discount Received 3,000
Cash 400 Interest Received 2,600
Purchases 1,00,000 Returns Outward 2,600

2,45,800 2,45,800

Even though the debit and credit sides agree, the Trial Balance is incorrect. Assets, i.e., Fixtures and Debtors are wrongly shown
on the credit side and Returns outward, Discount Received, Bank Overdraft and Creditors on the debit side. The redrafted Trial
Balance is shown as above.

Question: 5 A bookkeeper extracted the following Trial Balance as on 31st March, 2023.

Debit Balance ₹ Credit Balance ₹

Furniture 20,000 Capital 2,00,000
Debtors 2,00,000 Creditors 80,000
Stock 1,04,000 Sales 8,58,000
Trade Expenses 50,000 Machinery 50,000
Wages 30,000 Discount Allowed 4,000
Stock (31st March,2021) 98,000 Drawings made by the Proprietor 45,000
Purchases 6,25,000
Wife’s loan to the business 50,000
Motor Van 60,000

12,37,000 12,37,000

You are required to

(1) State the errors giving reasons
(2) Redraft the Trial Balance correctly
Solution: 5
(1) (a) Stock on 31st March,2023 will not appear in the Trial Balance because it represents a part of the goods purchased but not
yet sold. As the total purchases have been included in the Trial Balance, there is no need of including Closing Stock again.
(b) Machinery is an asset and thus will appear in the debit column.
(c) Wife’s Loan to the business is a liability. It will appear in the credit column.
(d) Discount allowed, being an expense, will appear in the debit column.
(e) Drawings made by the proprietor is a decrease of capital (i.e., decrease of proprietor’s claim from the business). It will appear
in the debit column.
(2) Redrafted the Trial Balance as on 31st March, 2023
Heads of Accounts L.F Debit Balance Credit Balance
Furniture 20,000
Capital 2,00,000
Debtors 2,00,000
Stock (1st April,2020) 1,04,000
Creditors 80,000
Trade Expenses 50,000
Sales 8,58,000
Wages 30,000
Machinery 50,000
Purchases 6,25,000
Wife’s Loan to the business 50,000
Discount Allowed 4,000
Drawings made by the proprietor 45,000
Motor Van 60,000
Total 11,88,000 11,88,000

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