Name of Institution

AIBS
MIB, Semester 1 Accounting and Finance Luvnica Rastogi

Objective
In this session we will learn
Trial Balance

Name of Institution

Trial Balance

Name of Institution

Under the double-entry system, the debit and credit amounts must be equal It is a device for verifying the equality of debits and credits The equality of the debits and credits totals of the trial balance proves that we have recorded equal debits and credits in the accounts
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Illustration: Fashion Concepts Co. Name of Institution Trial Balance: June 30, 20XX
Account Cash Accounts Receivable Office Supplies Office Equipment Bank Loan Accounts Payable Share Capital Consulting Revenue Rent Expense Salaries Expense Supplies Expense Utilities Expense TOTAL Debit 7,000 3,000 3,000 5,000 5,000 1,000 10,000 7,000 600 2,500 1,200 700 23,000 23,000
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Credit

Trial Balance

Name of Institution

It verifies that we have computed account balances correctly Types of errors

Errors of principle Errors of omission and repetition Compensatory errors

Errors
Errors of principle

Name of Institution

Posting a journal entry to a wrong account will not affect the trial balance. For example, suppose that for payment of office rent we debited Office Equipment instead of Rent Expense The trial balance will still balance

Errors
Errors of omission and repetition

Name of Institution

The trial balance will not reveal either the complete omission of a transaction from the ledger or the recording of the same transaction more than once

Compensatory Errors
The recording of the same erroneous amount for both the debit and credit of a transaction will not show up in the trial balance
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Locating Errors

Name of Institution

If the debit and credit totals of the trial balance do not agree, the following errors are likely:
Posting a debit as a credit or a credit as a debit Computing an account balance incorrectly Copying the amount of an account balance to the trial balance incorrectly Copying a debit balance in an account as a credit balance, or a credit balance in an account as a debit balance, to the trial balance Omitting an account balance from the trial balance Totalling the trial balance incorrectly
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Exercise Impact on Trial Balance

Name of Institution

1. A debit of Rs. 800 to Salaries Expense was overlooked and not posted 2. Payment of Rs. 1,400 for rent was recorded as a debit to Rent Expense of Rs. 1,400 and a credit to Cash of Rs. 140 3. Payment of annual insurance premium of Rs. 180 for the companys equipment was recorded as a debit to Equipment of Rs. 180 and a credit to Cash of Rs. 180
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Exercise Impact on Trial Balance

Name of Institution

A purchase of supplies of Rs. 2,900 on credit was not recorded in the journal at all Payment of telephone expense of Rs. 430 was recorded in the amount of Rs. 430 as a debit to Cash and a credit to Telephone Expense

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Recap
In this session we learnt
Trial Balance

Name of Institution

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Next Session
In the next session we will learn
Profit & Loss Account

Name of Institution

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