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Balancing accounts and the trial Balance

The document explains the principles of double entry bookkeeping, detailing how transactions are recorded in T-accounts with corresponding debits and credits. It outlines the steps for balancing accounts and preparing a trial balance to ensure the accuracy of financial records. Additionally, it provides examples and typical balances for various accounts to aid in understanding the concepts presented.

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Audrey Roland
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13 views

Balancing accounts and the trial Balance

The document explains the principles of double entry bookkeeping, detailing how transactions are recorded in T-accounts with corresponding debits and credits. It outlines the steps for balancing accounts and preparing a trial balance to ensure the accuracy of financial records. Additionally, it provides examples and typical balances for various accounts to aid in understanding the concepts presented.

Uploaded by

Audrey Roland
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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POA Balancing off Accounts and the Trial Balance

Double Entry is recording a transaction twice. Once on the debit


side and once on the credit side. See T-accounts below.
Name of Account

Left hand side Right Hand Side

Debit side Credit side

Name of Account

Left hand side Right Hand Side

Debit side Credit side

Debit means to write or record transaction on the left of the T-


account.
Credit means to write or record transaction on the right hand side
of the T-account.

Rules of Double Entry


 For every transaction, 2 accounts are affected.
 For every debit entry there must be a corresponding credit
entry. Meaning if you write on the left in one T-account, then
you must write on the right hand side of the other T-account.
Therefore double entry is recording a transaction in 2 t-accounts,
one on the debit side and the other on the credit side.
Once double Entry is complete, it is time to balance off the
accounts. To balance is make both sides of the account equal.
Any side that is less, is added ,to make both sides the same
amount. The balance also signifies the amount left on the
account (the balance).

Steps to Balancing of Accounts


1. Total/Add the debit side and Total/Add the credit side of the
account.
2. Find the difference/balance (Balance= highest total - lowest
Total) .
3. Record the balance on the side with the Lowest Total, dating it
the end of the month and the details is balance c/d.
4. Total both sides again, which should now be the same amount.
Double Underline the figures/total.
5. Record the balance again on the opposite side of the balance
c/d, below the totals. Date it for the first of the new month and
for details balance b/d.
If there is no difference and both sides are equal, record and
underline the totals.
Example

Creditor-T. Jones
Amoun
Date Details Date Details Amount
t
2024 $ 2024 $
19- Return Purchase
500 2-Jan 2000
Jan Outwards s
10- 31- Purchase
Bank 2000 500
Jan Jan s
2500 2500

If both sides are equal and the total is there, double underline
the totals.
Creditor-T. Scott
Amoun Amoun
Date Details Date Details
t t
2024 $ 2024 $
19-Jan Bank 5000 2-Jan Purchases 5000

Examples of Balancing off


Example 1
Balance = total credit-total debit as the credit side is more.
Balance= Total credit - Total debit
Therefore balance = 31500 - 0 =31500
We add the 31500 to the debit side as the balance c/d and total
both sides. Then we bring down the balance on the credit side.

Capital A/c
Amoun Amoun
Date Details Date Details
t t
2024 $ 2024 $
Balance
Jan31 31500 1-Jan Bank 29000
c/d
31-Jan printer 2500
31500 31500
Balance
Feb 1 31500
b/d
Example 2
Total both sides and find the difference.

Balance= total debit-total credit as the debit side is more


Therefore Balance =700-200=500. We add the 500 to the credit
side as the balance c/d and total both sides. Then we bring down
the balance on the debit side.

Equipment
Amoun Amoun
Date Details Date Details
t t
2024 $ 2024 $
Creditor-
4-Jan 500 10-Jan cash 200
N.Parks
6-Jan cash 200 31-Jan Balance c/d 500
700 700
Feb 1 Balance b/d 500

Example 3
If its one figure, and balance in 1 line, write balance and double
underline totals.
Creditor-T. Riley
Amoun
Date Details Date Details Amount
t
2024 $ 2024 $
31-Jan Balance c/d 3000 2-Jan Purchases 3000
Balance
Feb 1 3000
b/d

The Trial Balance


A trial balance is a bookkeeping worksheet in which the
balance b/d in the accounts are listed under debit or credit
columns according to the side the balance b/d falls on, and
the totals are added. If everything is correct, the totals
should be equal. A company prepares a trial balance
periodically, usually at the end of every reporting period.
The purpose of producing a trial balance is to ensure that
the double entries made are correct.
The premise for the trial Balance is that if for every debit
entry there is a corresponding credit entry then total debit
entries must be equal to total credit entries.
The Trial Balance is easy, requiring that we list the name
of each account with a balance b/d and that we place the
amount of the balance b/d under the debit or credit column.
If the balance b/d is on the debit side, then we write it
under the debit column and if the balance b/d is on the
credit side, then we write it under the credit column. After
entering all balance b/ds we then total each column. If both
columns are equal, our Trial balance is correct/balanced.
Accounts without a balance b/d are excluded as they
are balanced already.
A trial balance is prepared to check the arithmetical
accuracy of the double entries made in the ledger. When all
transactions have been recorded the total debit balances
must be equal to the total credit balances.
Example
Trial Balance as at 31 May 2017
Debit Credit
$ $
Rent 240
Stationary 60
Bank 2367
Cash 200
Sales 1496
Debtor-C. Bailey 270
B. Hughes 172
H. Spencer 154
Capital 2500
Purchases 1082
Creditor-D. Ellis 315
D. Mendez 234
4545 4545

It is important to know the typical balances for the different


accounts, as CSEC exams sometimes give an incorrect
Trial balance for students to correct.
The typical balances for each accounts are listed below:
Accounts having debit balances
1. Purchases
2. Expenses - Example :- Wages / Salaries / Rent / Rates
3. Non current assets - Examples :- Equipment / Motor
vehicles
4. Current assets - Examples :- Inventory of goods / Trade
receivables / Cash and Bank*
5. Drawings
*Note a bank balance can also be on the credit side if the
account is in overdraft. An overdraft is generally a negative
figure.
Accounts having credit balances
1. Revenue
2. Income - Examples :- Discount received / rent received
3. Non current liabilities - Example :- Loan from bank
4. Current liabilities - Example :- Trade payables

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