Welcome to Shri Krishna Education Centre Shri Krishna

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Welcome to Shri Krishna Education Centre Shri Krishna Education visit us at www. accountsshikshak.

Welcome to Shri Krishna Education Centre Shri Krishna Education visit us at www. accountsshikshak. com 1

Meaning of a Trial Balance A Trial Balance is a statement of accounts which

Meaning of a Trial Balance A Trial Balance is a statement of accounts which appears in the Ledger showing either the balances or the total amount of debit and credit items. ‘’A Trial Balance is a statement, prepared with the debit and credit balances of the Ledger Accounts to test the arithmetical accuracy of the books’’. ------ J. R. Batliboi A Trial Balance is prepared after having posted the Journal entries into the Ledger and balancing the accounts. Shri Krishna Education visit us at www. accountsshikshak. com 2

Objectives or Functions of a Trial Balance 1. To Ascertain the Arithmetical Accuracy of

Objectives or Functions of a Trial Balance 1. To Ascertain the Arithmetical Accuracy of Ledger Accounts: The Trial Balance enables one to establish whether posting and other accounting processes have been carried out without committing arithmetical errors. 2. To Help Prepare the Final Accounts: Financial Statements are prepared from the Trial Balance. Preparation of Financial Statements, therefore, is the second objective of preparing a Trial Balance. Shri Krishna Education visit us at www. accountsshikshak. com 3

3. Summary of Each Account: The Trial Balance offers a summary of the Ledger.

3. Summary of Each Account: The Trial Balance offers a summary of the Ledger. The Ledger may have to by referred to only when more detail is required in respect of an account. 4. To Help in Locating Errors: The Trial Balance helps in locating errors in Book Keeping work. It should, however, be borne in mind that it does not disclose all the errors in Book Keeping but only the arithmetical inaccuracies. Shri Krishna Education visit us at www. accountsshikshak. com 4

Methods of Preparing a Trial Balance A Trial Balance may be prepared by following

Methods of Preparing a Trial Balance A Trial Balance may be prepared by following either the Balance Method or the Totals Method. 1. Balance Method: In this method, only the debit or credit balances are entered separately in the two columns. This is known as the Net Trial Balance. This is the commonly used method of preparing a Trial Balance because it facilitates the preparation of the final accounts. 2. Total Method: In this method, the total of each side of the account is entered respectively in the debit and credit columns of the Trial Balance. Such a Trial Balance is known as the Gross Trial Balance. Shri Krishna Education visit us at www. accountsshikshak. com 5

Hints for Preparing a Trail Balance 1. A Trial Balance is prepared with the

Hints for Preparing a Trail Balance 1. A Trial Balance is prepared with the help of Ledger and Cash Book. 2. While preparing a Trial Balance all the Personal, Real and Nominal Accounts are considered. 3. In addition to these, the cash balance and bank accounts are considered. 4. If an account does not show any balance, it is ignored. Shri Krishna Education visit us at www. accountsshikshak. com 6

5. The Ledger Accounts showing debit balance are shown in the debit column of

5. The Ledger Accounts showing debit balance are shown in the debit column of a Trial Balance and the Ledger Accounts showing credit balances are shown in the credit column of a Trial Balance. 6. The Purchases Account always shows a debit balance which is shown in the debit column of a Trial Balance. 7. The Sales Account always shows a credit balance which is shown in the credit column of a Trial Balance. 8. The Return Inwards Account or Sales Return Account always shows a debit balance and hence is shown in the debit column of a Trial Balance. Shri Krishna Education visit us at www. accountsshikshak. com 7

9. The Return Outwards Account or Purchases Return Account always shows a credit balance

9. The Return Outwards Account or Purchases Return Account always shows a credit balance and hence is shown in the credit column of a Trial Balance. 10. The Opening Stock Account shows a debit balance which is shown in the debit column of a Trial Balance. Shri Krishna Education visit us at www. accountsshikshak. com 8

11. Generally, the closing stock does not appear in the Trial Balance. It is

11. Generally, the closing stock does not appear in the Trial Balance. It is usually given as an additional information or adjustment outside the Trial Balance. It represents the balance of goods unsold out of opening stock and purchases. If the closing stock appears in the Trial Balance, it means that it has already been adjusted through purchases by debiting the closing stock and crediting the Purchases Account. In this case closing stock will not be shown on the credit side of the Trading Account and it will be shown as an asset on the assets side of the Balance Sheet. Shri Krishna Education visit us at www. accountsshikshak. com 9

12. Accounts of assets such as Plant and Machinery, Furniture and Fixtures, Land Building,

12. Accounts of assets such as Plant and Machinery, Furniture and Fixtures, Land Building, Motor Car, Bills Receivable, Goodwill, Trade Marks, Patents and Copy Right, Cash in Hand, Cash at Bank, etc. , shown a debit balance and are shown in the debit column of a Trial Balance. 13. Accounts of incomes and gains show credit balances and are shown in the credit column of a Trial Balance. 14. Accounts of expenses and losses show debit balances and are shown in the debit column of Trial Balance. Debit Balances: Assets, drawing, debtors, expenses and losses. Credit Balances: Liabilities, capital, creditors, incomes and gains. Shri Krishna Education visit us at www. accountsshikshak. com 10

Shri Krishna Education visit us at www. accountsshikshak. com 11

Shri Krishna Education visit us at www. accountsshikshak. com 11