- Rules to prepare the Trial balance
- Steps to prepare Trial balance
- Specimen of Trial balance
- Example of Trial Balance
A trial balance is a conglomerate of or list of debit and credit balances extracted from various accounts in the ledger including cash and bank balances from cash book. The rule to prepare trial balance is that the total of the debit balances and credit balances extracted from the ledger must tally. Because every transaction has a dual effect with each debit having a corresponding credit and vice versa.
Therefore, at the end of the accounting period or at the end of each month, the balances of the ledger accounts are extracted, and trial balance is prepared to test as to if the total debits are equal to total credits or not.
Rules to prepare the Trial balance
The rule to prepare the Trial balance is an equation which is as follows:
Total Debit Entries = Total Credit Entries
Debit | Credit |
|
Gains (Discount received, Return Outwards, Bad debts recovered, Profit and loss A/c (Cr) etc.) |
Steps to prepare Trial balance
The following are the steps to prepare Trial Balance.
Step 1 | Cast/ Balance all the ledger accounts in the books. |
Step 2 | List all the Debit balances on the debit side and sum them up. |
Step 3 | List all the Credit balances on the credit side and sum them up. |
Ideally, the Trial Balance should Tally at Step 3. |
Specimen of Trial balance
Trial Balance of XXX Ltd as at ______
SI No | Particulars | L.F | Amount Rp DR | Amount Rp CR |
Example of Trial Balance
____ Ltd Trial Balance 31- Dec 2018 (in Dirham)
Accounts | Debit | Credit |
Cash | 1,02,280 | - |
Accounts Receivable | 7,500 | - |
Office Expenses | 2,500 | - |
Prepaid Rent | 600 | - |
Prepaid Insurance | 120 | - |
Office furniture and equipment | 15,000 | - |
Bank loan | - | 15,000 |
Accounts Payable | - | 5,000 |
Unearned Revenues | - | 7,500 |
Capital | - | 1,00,000 |
Drawings | 3,000 | - |
Commission Revenue | - | 12,500 |
Salary Expenses | 9,000 | - |
Total | 1,40,000 | 1,40,000 |
Read More on Trial Balance
What is Trial Balance, How to Prepare Trial Balance, Methods to Prepare Trial Balance, Errors in Trial Balance
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-This question was submitted by a user and answered by a volunteer of our choice.
Are you facing difficulty in understanding the crux of the trial balance? I would like to help you by providing the meaning followed by items to be included on either side of the trial balance.
Meaning
The term trial balance refers to the total of all the general ledger balances. It is a statement prepared at a certain period to check the arithmetic accuracy of the accounts (i.e., whether they are mathematically correct and balanced). It contains a list of all the general ledger accounts.
Trading account, Profit and Loss account and Balance Sheet are prepared according to the ledger balances as posted in the trial balance.
Now it’s time to learn about the various items which are placed on either side of the trial balance.
Items that appear on the debit side of the trial balance
Generally, assets and expenses have a positive balance so they are placed on the debit side of the trial balance. An asset and expense increases when it is debited and vice versa
Exclusive List of Items
- Land and Buildings
- Plant and Machinery
- Furniture and Fixtures
- Office Tools and Equipment
- Cash at Bank
- Cash in Hand
- Motor Van
- Loss from the sale of fixed assets
- Travelling charges
- Printing and postage expenses
- Legal expenses
- Selling and distribution expenses
- Sundry debtors
- Bills receivables
- Commission paid
- Rent paid
- Interest paid
- Discount allowed
- Opening stock
- Purchases
- Prepaid expenses
- Advertisement expenses
- Bad Debts
- Wages and salaries
- Bank charges
Items that appear on the credit side of the trial balance
Generally capital, revenue and liabilities have credit balance so they are placed on the credit side of the trial balance. The capital, revenue and liability increase when it is credited and vice versa.
Exclusive List of Items
- Sundry Creditors
- Bank Overdraft/Loan
- Bills Payables
- Sales (Revenue)
- Purchase Returns
- Common stock
- Un-earned revenues
- Retained earnings
- Rent Received
- Interest Received
- Discount from Creditors
- Discount on Purchases
- Dividend Received
- Interest on Drawings
- Bad Debts recovered
- Provision on Bad Debts (Cr.)
- Apprentice premium
- Miscellaneous/Sundry income
- Commission received
- Bank interest received
- Compensation received
- Outstanding income
- Income from investments
- Bonds payable
- Other incomes