&

CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

Unit 3: TRIAL BALANCE

“Confident walking is more successful than confused running. Follow no one but
learn from everyone.”

MEANING AND PURPOSE OF TRIAL BALANCE

1. Meaning: Trial Balance is a- statement which lists down the debit and credit balances of all
- - -
>

accounts, as at a particular date under two separate columns.

=
Dr
- - - .

2. Features:
(a) Trial Balance is a statement and not
- -
an Account.
-
(b) The Totals of all Debit Balances and Credit Balances will be equal.
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L

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(c) It has two columns - Debit Column and Credit Column. >
-

-
-

(d) It is the -
-
- -

third stage in the Accounting Process

-
- -

(e) Trial Balance can be prepared on any day of accounting period. It shows balances on
-
-

that date.
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3. Objectives / Advantages: Third phase in accounting process, i.e. preparation of Trial Balance
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(a) Ledger itself may be referred to only when further details are required in respect of
- - -

that Account.
(b) Serves as a check on- -
Arithmetical Accuracy of books, since Debit and Credit Totals must
-
-
agree.
-

(c) Provides basis of preparation of Final Accounts, i.e. Financial Statements - P&L A/c &
-
- > -

Balance Sheet.
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4. Source for Trial Balance: Ledger Accounts

5. Limitations: Mere tallying / agreement of Trial Balance is- -
-

-
not a conclusive proof of
correctiv
-

arithmetical accuracy. The Trial Balance may still tally with the following errors -
- -
-

↓
(a) Complete omission of a transaction either in journalizing or in ledger posting therefrom,
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a(b) Entry is posted twice in the ledger.

Rectifici
-
↑

(c) Recording of a transaction at a wrong amount,

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(d) Debiting or Crediting correctly in the Ledger, but in the wrong account head,
-
- -

(e) Compensating Errors, i.e. errors whose effects nullify each other.
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FORMAT OF TRIAL BALANCE [100 ]

1. Methods of preparation of Trial Balance: Trial Balance-may be prepared as under -
Method What is written in Trial Balance? Remarks
(a) Total
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The Total of Debit & Credit Side of each C
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Merit: Time taken to balance each
-

Method Ledger Account is recorded in the Trial Ledger A/c is saved.

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2
-

Balance, in the respective columns. Demerit: Not useful for preparation

-
- -

of Final Accounts.
r -
(b) Balances Here, only the balance in each Ledger Most popularly used method since
-
- -

Method A/c is recorded in Trial Balance. Some it helps in preparation of Final

- -
-
-
-
accounts may have Dr. Balance while Accounts / Financial Statements
-
-

others have Cr. Balance.

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Page 2C.1
 CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

(c) Total &

-
-
This is a combination of above 2 Not regularly used.
- -

Balances methods. Both Totals and Balances are

T - -
-
Method indicated in separate columns in Trial
T - -

Balance.
T

2. Format of Trial Balance: X

Particulars (i.e. Name of Account)

- -
-Ledger Folio Dr, Amt (₹)
-
Cr. Amt (₹)
-

(1) (2) (3) (4)

Notes:
 In Column 1, Name of the Ledger A/c is given, e.g. Capital, Machinery, Sales, Purchases,
Bank, etc.
 In Column 2, the Page Number of the Ledger is given for tracking and tracing purposes.
-

 In Column 3 & 4, - (a) the Dr. and Cr. Totals of the Ledger A/c are given (in Total Method),
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and (b) the balances of each Ledger A/c are given (in Balances Method). Under Total and
Balances Method, additional columns are added, to indicate Totals and Balances separately.

FEATURES OF TRIAL BALANCE :- DR. TOTAL = CR. TOTAL

1. The total of Debit Balances is equal to the total of Credit Balances at a particular point of
- - -

time. The balances are tallied in this statement to assess whether the Fundamental
> -

Accounting Equation is satisfied or not.

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2. Both the totals match due to the following reasons:

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(a) Trial Balance is prepared based on Ledger Accounts. Entries are made in each ledger
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accounts based on Journal.

-

(b) Each Journal Entry containsC

>
-
two aspects of equal amount - Debit and Credit.
-
T
(c) Hence, where there is a debit to a particular account for a specified amount, there will
- -

also be a credit for the same amount in another Account.

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(d) This leads to the equality of debit balance and credit balance.
-
-

Important Notes in preparing Trial Balance

 Accounts with Nil balance will not be shown in the Trial Balance.
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 All Accounts with balances, i.e. whether Real, Personal or Nominal, will be shown in
- - - -

Trial Balance.
 Accounts relating to - (a) Assets (b) Expenses (c) Losses (d) Drawings haveE
-

~ Dr. Balance.
~ Accounts relating to - (a) Capital (b) Liabilities (c) Incomes (d) Gains haveE
- - -
-

- -
Cr. Balance.
 If the Trial Balance does not agree, it may be tallied by transferring the difference of
- -

Debit or Credit to an Account known as-

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Suspense Account. This is a-

-

temporary account
-
opened to proceed further and to prepare the Financial Statements in a timely manner.
- - -

[Such a Trial Balance may be called as Adjusted Trial Balance.]

-

Dra Cra

endant
-
-

ToTay a 320 000

,

350000 -
Detailed
discussion

I
/recrification
& All >
Al vi & SussencI 1000
-

Red
↑ /

Nominal (B) Errors)

personal Ea
M

fro S

Page 2C.2
 CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE
&
↑

ASSIGNMENT QUESTIONS
Question 1 (ICAI Study Material) Pg no._____
Given below is a ledger extract relating to the business of X and Co. as on March, 31, 2022.
- -
-

You are required to prepare the Trial Balance by the Total Amount Method.
-

Dr. Cash Account Cr.

Particulars ₹ Particulars ₹

[
1
To Capital A/c 10,000 By Furniture A/c 3,000
To Ram’s A/c 35500 25,000 By Salaries A/c 28000
2,500
To Cash Sales 500 By Shyam’s A/c 21,000
By Cash Purchases 1,000
By Capital A/c 500
By Balance c/d
-
6
f 7,500
35,500 35,500
Dr. Furniture Account
-
Cr.
Particulars ₹ Particulars ₹
To Cash A/c ~3,000 By Balance c/d G
3,000
-

3,000 3,000
Dr. Salaries Account Cr.
Particulars
-- ₹ Particulars ₹
To Cash A/c 2,500 By Balance c/d 2
2,500
2,500 2,500
Dr. Shyam’s Account
-
Cr.
Particulars ₹ Particulars ₹
r

[
To Cash A/c 21,000 By Purchases A/c 25,000
21500 (Credit Purchase)
To Purchase Returns A/c 500
To Balance c/d
-
⑳3,500 –
25,000 25,000
Dr. Purchases Account
-
Cr.
Particulars ₹ Particulars ₹
~
C
Jason
To Cash A/c (Cash Purchases) 1,000 By Balance c/d 26,000
To Sundries as per Purchases
~
Book (Credit Purchases) 25,000
26,000 26,000
Dr. Purchases Returns Account
-
Cr.
Particulars ₹ Particulars ₹
~
To Balance c/d W500 By Sundries as per Purchases 500
Return Book
500 500
Dr. Ram’s Account
-
Cr.
Particulars ₹ Particulars ₹
r

] [
To Sales A/c (Credit Sales) 30,000 By Sales Returns A/c
- 25100 100
30000 By Cash A/c 25,000
6
-

By Balance c/d 4,900

30,000 30,000

Page 2C.3
 CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

Dr. Sales Account Cr.

G
Particulars ₹ Particulars ₹

[
To Balance c/d 30,500 By Cash A/c (Cash Sales) 30500 500
By Sundries as per Sales 30,000
Book (Credit Sales)
30,500 30,500
Dr. Sales Returns Account
-
Cr.
Particulars ₹ Particulars ₹
~
To Sundries as per Sales 100 By Balance c/d
Returns Book G
100
100 100
Dr. Capital Account
-
Cr.
Particulars ₹ Particulars ₹
To Cash A/c S 500 By Cash A/c C
100 10,000
To Balance c/d
-
C9,500
10,000 10,000

Total
MethodSolution
S. No.
Trial Balance of X and Co. as at 31.03.2022
Name of Account Total Debit ₹ Total Credit ₹
1. ~ Cash A/c - 35,500 = 28,000
~ r
2. Furniture A/c 3,000
3. rSalaries A/c r
2,500
~ Shyam’s A/c r r
4. 21,500 25,000
5. rPurchases A/c
T
~26,000
r -
r
6. Purchases Returns A/c r
500
r
-
m
7. Ram’s A/c 30,000 25,100
r -
r
8. Sales A/c 30,500
r
-
r
9. Sales Returns A/c 100
~ Capital A/c
-
- ~
10. - -
500 -
10,000
-
1,19,100 -
1,19,100

Question 2 (ICAI Study Material) Pg no._____

-
-
Taking the same information as given in Question 1, prepare Trial Balance by Balance Method.

Balance
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Solution Trial Balance of X and Co. as at 31.03.2022
S. No. Name of Account Debit Balance ₹ Credit Balance ₹
1. Cash A/c r 7,500
-
r
2. Furniture A/c 3,000
m
-

3. Salaries A/c 2,500

- -
4. Shyam’s A/c 3,500
-
r
5. Purchases A/c
-
26,000 r
6. Purchases Returns A/c
- r
500
7. Ram’s A/c 4,900
-
r
8. Sales A/c 30,500
~100
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9. Sales Returns A/c

- -
10. Capital A/c
-
9,500
44,000 44,000

Page 2C.4
 CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

Question 3 (CA Foundation Nov 2019) (5 Marks) / (ICAI Study Material) (Similar) Pg no._____
An inexperienced bookkeeper has drawn up Trial Balance for the year ended 31st March 2023.
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) - -
-

Dr. Balance Cr. Balance

- X
Provision For Doubtful Debts 250 Provisions
-
~
Bank Overdraft
-
( res
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1,654
-
X
Cr Bd
-
.

Capital 4,591 L
-
>
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Trade payables 1,637 L
-
r - Deston
Trade receivables
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2,983
com/ Gain
~
Discount Received
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In 252 X To sale
Discount Allowed
Drawings
- E sen
-
1,200
733 X
~ See Rex Inward
-
r
Office Furniture
-
2,155 -
Te Debton
General Expenses 829 X
~
-

-
Purchases
-
10,923
Returns Inward 330 X
~
([p)
-

Rent & Rates 314 ~

~
-
-
W
Salaries 2,520
-
Sales 16,882 -

~
Inventory (opening stock) 2,418 ~
X
Provision for Dep. on Furniture
-
364
25,033 25,002
Draw ‘Corrected’ Trial Balance, debiting or crediting any residual errors to Suspense Account.
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Question 4 (ICAI Study Material) Pg no._____

The following trial balance as on 31st March, 2022 was drawn from the books of fintech
- - -

traders:
-

L.F. Dr. Balance (₹)

-
Cr. Balance (₹)
-

Building - 60,000 -
Machinery - 17,000 -
Return Outward /Purches Retur X
-
Cro 2,600 X -
Bad Debts
-
- 2,800 -
Cash -
L 400 -
Discount Received
-
X Cro 3,000 X -
Bank Overdraft X CV- 10,000 X -
Creditors
-
X Cr 50,000 X -
Purchases-
-
1,00,000 -
Capital -
- 73,600
Fixtures X DV- - 5,600 X
-

Sales - - 1,04,000
Debtors X Dr
- - 60,000 X
Interest Received Eincome) z
- 2,600

S I
-

Input CGST A/c Dv - 3,000 X

Dr
-

Input SGST A/c

-
* Du - 3,000 X
Input IGST A/c
-
X Du - 4,800 X
[
Output CGST A/c 5,400 -
CV
zu
Output SGST A/c * [v 5,400 S -
- -

Total 2,56,600
-
2,56,600-

Page 2C.5
CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

Even though the debit and credit sides agree, the trial Balance contains certain errors. Check
- - - -

the accuracy of trial balance.

-

Solution
Corrected Trial Balance of Fintech traders as on 31st March, 2022
L.F. Dr. Balance (₹) Cr. Balance (₹)
Building 60,000 -
Machinery 17,000 -
Return Outward - 2,600
Bad Debts 2,800 -
Cash 400 -
Discount Received - 3,000
Bank Overdraft - 10,000
Creditors - 50,000
Purchases 1,00,000 -
Capital - 73,600
Fixtures 5,600 -
Sales - 1,04,000
Debtors 60,000 -
Interest Received - 2,600
Input CGST A/c 3,000 -
Input SGST A/c 3,000 -
Input IGST A/c 4,800 -
Output CGST A/c - 5,400
Output SGST A/c - 5,400
2,56,600 2,56,600

Page 2C.6
 CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

PRACTICE QUESTIONS

MULTIPLE CHOICE QUESTIONS

1) A trial balance will not balance if _________
a) Correct journal entry is posted twice.
b) The purchase on credit basis is debited to purchases and credited to cash.
c) ₹ 500 cash payment to creditor is debited to Trade payables for ₹ 50 and credited to cash
as ₹ 500.
2) ₹ 1, 500 received from sub-tenant for rent and entered correctly in the cash book is posted
to the debit of the rent account. In the trial balance __________
a) The debit total will be greater by ₹ 3,000 than the credit total.
b) The debit total will be greater by ₹ 1,500 than the credit total.
c) Subject to other entries being correct the total will agree.
3) After the preparation of ledgers, the next step is the preparation of _________
a) Trading accounts
b) Trial balance
c) Profit and loss account
4) After preparing the trial balance the accountant finds that the total of debit side is short by
₹ 1,500. This difference will be _________
a) Credited to suspense account
b) Debited to suspense account
c) Adjusted to any of the debit balance account
5)
S.No. Account heads Debit (₹) Credit (₹)
1. Sales 15,000
2. Purchases 10,000
3. Miscellaneous expenses 2,500
4. Salaries 2,500
Total 12,500 17,500
The difference in trial balance is due to _____________________________
a) Wrong placing of sales account
b) Wrong placing of salaries account
c) Wrong placing of miscellaneous expenses account
ANSWERS MCQs
1. (c) 2. (a) 3. (b) 4. (b) 5. (b)

TRUE / FALSE
State with reasons whether the following statement is true or false:
1) Preparing trial balance is the third phase of accounting process.
2) Trial balance forms a base for the preparation of Financial statements.
3) Agreement of trial balance is a conclusive proof of accuracy.
4) A trial balance will tally in case of compensating errors.
5) A trial balance can find the missing entry from the journal.
6) Suspense account opened in a trial balance is a permanent account.
7) The balance of purchase return account has a credit balance.

Page 2C.7
 CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

8) Trial Balance is prepared after preparing the Profit and Loss A/c.
9) The Trial Balance checks the honesty of the book-keeper.
10) The Trial Balance ensures the arithmetical accuracy of the books.
11) Trial Balance is an absolute proof of the accuracy of the books of accounts.
12) Rectification of errors are necessary to tally the trial balance.
13) A tallied trial balance means that the books of accounts have been prepared as per
accepted accounting principles.
14) The rationale behind the opening of a suspense account is to tally the trial balance
Solution
1) True: Trial balance is the third phase of accounting process which forms the base for the
preparation of the final accounts.
2) True: Based on trial balance only, we can prepare financial statement.
3) False: Agreement of trial balance gives only arithmetical accuracy, there can still be
errors in preparing the trial balance
4) True: Since compensating errors cancel out of due to their compensating nature of
amounts, hence trial balance still agree in such case.
5) False: A trial balance cannot find the missing entry from the journal
6) False: Suspense account opened in a trial balance is a temporary account
7) True: The balance of purchase return account has a credit balance. As purchases are
debited, any returns shall be credited.
8) False: Trial Balance is prepared before Profit & Loss A/c because all ledger balances are
put on trial to ascertain the maintenance of debit and credit equality.
9) False: The trial balance helps to establish the arithmetical accuracy of ledger books.
10) True: The trial balance helps to establish the arithmetical accuracy of ledger balances.
11) False: Equal balance of trial balance is not a proof of complete accuracy e.g. trial balance
cannot detect error of principle, compensating error etc.
12) False: There is no need to rectify the error in order to tally the trial balance. Trial Balance
can be tallied by debiting or crediting the difference amount to the suspense account.
13) False: Trial balance only checks the arithmetical accuracy of the books. Errors of principle
and errors of commission will not affect the agreement of the trial balance.
14) False: The rationale behind the opening of a suspense account is to avoid delay in the
preparation of financial statements

OBJECTIVES OF PREPARING TRIAL BALANCE

1) Checking of the arithmetical accuracy of the accounting entries: Trial Balance enables one
to establish whether the posting and other accounting processes have been carried out
without committing arithmetical errors. In other words, the trial balance helps to establish
the arithmetical accuracy of the books.
2) Basis for preparation of financial statements: Trial Balance forms the basis for preparing
financial statements such as the Income Statement and the Balance Sheet. The Trial
Balance represents all transactions relating to different accounts in a summarized form
for a particular period. In case, the Trial Balance is not prepared, it will be almost
impossible to prepare the financial statements to know the profit or loss made by the
business during a particular period or its financial position on a particular date.
3) Summarized ledger: Trial Balance contains the ledger balances on a particular position of
a particular account can be judged simply by looking at the Trial Balance. The ledger may
be seen only when details regarding the accounts are required.

Page 2C.8
 CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

HOMEWORK QUESTIONS

Question 1 (ICAI Study Material) Pg no._____

From the following ledger balances, prepare a trial balance of Anuradha Traders as on 31st
March, 2023
Account Head ₹
Capital 1,00,000
Sales 1,66,000
Purchases 1,50,000
Sales return 1,000
Discount allowed 2,000
Expenses 10,000
Trade receivables 75,000
Trade payables 25,000
Investments 15,000
Cash at bank and in hand 37,000
Interest received on investments 1,500
Insurance paid 2,500

Question 2 (ICAI Study Material) Pg no._____

One of your clients, Mr. Singhania has asked you to finalize his accounts for the year ended
31st March, 2023. Till date, he himself has recorded the transactions in books of accounts. As
a basis for audit, Mr. Singhania furnished you with the following statement.
Dr. Balance Cr. Balance
Singhania’s Capital 1,556
Singhania’s Drawings 564
Leasehold premises 750
Sales 2,750
Due from customers 530
Purchases 1,259
Purchases return 264
Loan from bank 256
Trade payables 528
Trade expenses 700
Cash at bank 226
Bills payable 100
Salaries and wages 600
Inventories (1.4.2022) 264
Rent and rates 463
Sales return 98
5,454 5,454
The closing inventory on 31st March, 2023 was valued at ₹ 574. Mr. Singhania claims that he
has recorded every transaction correctly as the trial balance is tallied. Check the accuracy of
the above trial balance.

Page 2C.9
 CA NITIN GOEL ACCOUNTING PROCESS: TRIAL BALANCE

j (CA Foundation Dec 2021) (5 Marks)

Question 3 Pg no._____
From the following information, draw up a Trial Balance in the books of Shri M as on 31st
March,2023:
Particulars Amount Particulars Amount
Capital 1,40,000 Purchases 36,000
Discount Allowed 1,200 Carriage Inward 8,700
Carriage Outwards 2,300 Sales 60,000
Return Inward 300 Return Outwards 700
Rent and Taxes 1,200 Plant and Machinery 80,700
Stock on 1st April 2022 15,500 Sundry Debtors 20,200
Sundry Creditors 12,000 Investments 3,600
Commission Received 1,800 Cash in Hand 100
Cash at bank 10,100 Motor Cycle 34,600
Stock on 31st March, 2023 20,500

-
Question 4 (CA Foundation June 2022) (4 Marks) Pg no._____
One of your clients Mr. X asked you to finalize his account for the year ended 31st March,2022.
As a basis for audit, Mr. X furnished you with the following statement:
Dr. Cr.
X's Capital 4,668
X's Drawings 1,692
Leasehold Premises 2,250
Sales 8,250
Due from customers 1,590
Purchases 3,777
Purchase Return 792
Loan from Bank 768
Trade Expense 2,100
Trade Payable 1,584
Bills Payable 300
Salaries and Wages 1,800
Cash at Bank 678
Opening Inventory 792
Rent and Rates 1,389
Sales Return 294
16,362 16,362
The closing inventory was ₹ 1,722. Mr. X claims that he has recorded every transaction
correctly as the trial balance is tallied. Check the accuracy of the above trial balance and
give reasons for the errors, if any.

Page 2C.10