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Trial balance


Trial balance is a statement of accounts appearing in the ledger.
 

1.          The agreement of Trial balance ensures arithmetical accuracy and not accounting accuracy.
 

2.          Functions of Trial balance are to:
 

(i)         Ascertain arithmetical accuracy.
 

(ii)        Provide summary of ledger accounts.
 

3.  Trial Balance may not agree because of:
 

(a)      Incorrect balancing
 

(b)     Posting on the wrong side
 

(c)      incorrect amount being posted
 

(d)     Incorrect totaling of subsidiary book
 

(e)      Entry posted in the subsidiary is not posted in the ledger.
 

(f)       Opening balance is incorrect.
 

(g)     Other reasons.
 

­
Example-1

Paid Journal Entries to rectify the following errors:-
  1. Goods costing Rs.1,000 have been purchased on credit from Sohan, but no entry has been made in the books, although the goods were taken into stock.
     
  2. Goods amounting to Rs.4,000 have been sold on credit, but no entry has been made in the books.
     
  3. No entry has been made for Purchases Return of Rs.200.
     
  4. No entry has been made for Sales Return of Rs.450.
     
  5. Goods purchased from Ramesh Chandra on Credit for Rs.5,000 was recorded in purchase book as Rs.500.
     
  6. Sales of Rs.600 to Siya Ram were recorded as Rs.60 in the Sales Book.
     
  7. Goods purchased on Credit from Pawan for Rs.400 was recorded as Rs.4,000 in purchase book.
Solution:

JOURNAL
 
Date Particulars   Amount Dr. Amount Cr.
S.No     Rs. Rs.
1. Purchases A/c Dr. 1,000  
  To Sohan     1,000
  (Goods purchased from Sohan, nor entered in the books)      
2. Debtors (Personal )A/c Dr. 4,000  
  To Sales A/c     4,000
  (Goods sold on credit, not entered in the books      
3. Creditors (Personal ) A/c Dr. 200  
  To Purchases Return A/c     200
  (Purchases Return not recorded in the books)      
4. Sales Return A/c Dr. 450  
  To Debtors (Personal) A/c     450
  (Sales Return nor recorded in the Book)      
5. Purchases A/c Dr. 4,500  
  To Ramesh Chandra     4,500
  (Less amount recorded in Purchase Book)      
6. Siya Ram Dr. 540  
  To Sales A/c     540
  (Less amount recorded in Sales Book      
7. Pawan Dr. 3,600 3,600
  To Purchases A/c      
  (Excess amount recorded in Purchase Book)      

 

 

Example-2

Rectify the following errors :-
  1. An amount of Rs.2,500 spent for the extension of machinery has been debited to Wages Account.
     
  2. Rs.100 paid as cartage for the newly purchased furniture,posted to Cartage A/c.
     
  3. A builder’s bill for Rs.5,000 for erection of a small cycle shed was debited to Repairs Account.
     
  4. A cheque of Rs.1,700 received from Shyam Sunder was dishonoured and had been posted to the debit side of ‘Allowance A/c’.
     
  5. Rs.800 paid for the newly purchased ‘Fan’ posted to ‘Purchases Account’.
     
  6. Rs.4,000 the amount of sale of an old machinery has been credited to Sales Account.
     
  7. Rs.1,000 received from ‘X’ has been credited to ‘Y’s Account.

 

Solution:

JOURNAL
 
S.No     Rs.  
1. Machinery A/c Dr. 2,500  
  To Wages A/c     2,500
  (Amount wrongly debited to wages A/c, now rectified      
2. Furniture A/c Dr. 100  
       To Cartage A/c     100
  (Amount wrongly debited to Cartage A/c, now rectified      
3. Buildings A/c Dr. 5,000  
       To Repairs A/c     5,000
  (Extension to building wrongly debited to Repairs A/c now rectified)      
4. Shyam Sunder Dr. 1,700  
      To Allowance A/c     1,700
  (Dishonour of cheque received from Shyam Sunder wrongly debited to Allowance A/c      
5. Furniture A/c Dr. 800  
       To Purchase A/c     800
  (Purchase of fan wrongly posted to Purchases A/c      
6. Sales A/c Dr. 4,000  
      To Machinery A/c     4,000
  (Machinery sold wrongly posted to purchases A/c      
7. Y Dr. 1,000  
  To X     1,000
  (Amount wrongly credited to Y instead of X, now rectified )      

Note: If a cheque is dishonoured, the account of the party from whom the cheque was received must be debited. As such, in entry No. 4 the Account of Shyam Sunder has been debited.

 

 

 
 

Example-3

Rectify the following errors assuming that a suspense account was opened. Ascertain the difference in trial balance.
 
a. Credit sales of Mohan Rs.7,000 were posted to Karan as Rs.5,000.
 
b. Credit purchases from Rohan Rs.9,000 were posted to the Debit of  Gobind as Rs.10,000
 
 c. Goods returned ro Rakesh Rs.4,000 were posted to the  credit of  Naresh as Rs.3,000
 
d. Goods returned from Mahesh Rs.1,000 were posted to the debit of Manish as Rs.2,000. Cash sales Rs.2,000 were posted to commission account as Rs.200.
 
Solution:

JOURNAL  
 
      Rs. Rs.
(a) Mohan Dr. 7,000  
  To Karan     5,000
  To Suspence A/c     2,000
  (Credit sales of Mohan Rs.7,000 wrongly debited to karan as Rs.5,000,now rectified)      
(b) Suspence A/c Dr. 19,000  
  To Rohan     9,000
  To Gobind
(Credit purchases from Rohan Rs.9,000 wrongly debited to Gobind as Rs. 10,000, now rectified
    10,000
(c) Rakesh Dr. 4,000  
  Naresh
To Susoence A/c
Dr. 3,000  
7,000
  (Goods returned to Rakesh Rs.4,000 wrongly credited to
Naresh as Rs. 3,000, now rectified
     
(d) Suspence A/c Dr. 3,000  
  To Mahesh     1,000
  To Manish
(Goods retuned from Mahesh Rs.1,000 wrongly debited to Manish as Rs.2,000, now rectified
    2,000
(e) Commission A/c Dr. 200  
  Suspense A/c Dr. 1,800  
  To Sales A/c
(Cash sales Rs.2,000 wrongly credited to commission account as Rs. 200, now rectified)
    2,000
         

SUSPENSE ACCOUNT
 
  Rs.   Rs.
To Rohan 9,000 By Difference in Trial Balance  
To Gobind 10,000 (Balancing Figure ) 14,800
To Mahesh 1,000 By Mohan 2,000
To Manish 2,000 By Rakesh 4,000
To Sales A/c 1,800 By Naresh 3,000
  23,800   23,800

 

Example-4
Rectify the following errors :-

a. Credit sales to Gopal Rs.10,000 were recorded in purchases Book.

b. Credit sales to Gopal Rs.10,000 were recorded in purchases Book. However, Gopal’s account was correctly debited.

c. Credit purchases from Mayank Rs.15,000 were recorded in Sales Book.

d. Credit purchases from Mayank Rs.15,000 were recorded in Sales Book. However, Mayank’s account was correctly credited.

e. Goods returned to khushi Rs.8,000 were recorded in Sales Return Book.

f. Goods returned to Khushi Rs.8,000 were recorded in Sales Return Book. However , khushi’s account was correctly debited.

g. Goods returned from Chandni Rs.12,000 were recorded in Purchase Return Book.

h. Goods returned from Chandni Rs.12,000 were recorded in Purchase Return Book. However, Chandni’s account was correctly credited.
 
Solution:

JOURNAL
 
 
 
    Rs. Rs.
(a) Gopal Dr. 20,000  
      To Sales A/c     10,000
      To purchases A/c
(Credit sales to Gopal wrongly recorded in purchases Book)
    10,000
(b) Suspence A/c
    To Sales A/c
    To Purchases A/c
Dr. 20,000  
  (Credit sales to Gopal wrongly recorded in purchases Book.However, Gopal’s account was correctly debited)      
(c) Purchases A/c Dr. 15,000  
  Sales A/c Dr. 15,000  
      To Mayank
(Credit purchases from Mayank wrongly recorded in sales book)
    30,000
(d) Purchases A/c Dr. 15,000  
  Sales A/c
    To Suspence A/c
Dr. 15,000  
30,000
  (Credit purchases from Mayank wrongly recorded in sales book.However, Mayank’s account was correctly credited      
(e) Khushi 
    To purchases Return A/c
Dr. 16,000  
8,000
      To Sales Return  A/c     8,000
  (Goods returned to Khushi wrongly in sales return book)      
(f) Suspence A/c Dr. 16,000  
      To Purchase Return A/c     8,000
      To sales Return A/c     8,000
  (Goods returned to Khushi wrongly recorded in sales return book.However, Khushi’s account was correctly debited)      
(g) Sales Retrun A/c Dr. 12,000  
  Purchases Return A/c
    To
Dr. 12,000  
 
  (Goods returned from Chandni wrongly in purchases return book)      
(h) Sales Retrun A/c Dr. 12,000  
  Purchases Return A/c Dr. 12,000  
      To Suspence A/c     24,000
  (Goods returned from Chandni wrongly recorded in purchases return book. However, Chandni’s account was correctly credited )      

 

 

 

Example-5

A ledger-keeper could not agree the  Trial Balance.He transferred an amount of Rs.185.91 being excess of the debit side to the Suspense Account.The following errors were subsequently discovered:-

a. Amount payable to Govind Ram for repairs done to radio Rs.150 and radio supplied for Rs.950,were entered in the Purchase Book as Rs.1,000.

b. An item of Rs.500 relating to Prepaid Insurance Account was omitted to be brought forward from the previous year’s books.

c. A discount of Rs.58.12 allowed to a customer has been credited to him as Rs.56.21

d. An amount of Rs.500 due from Rakesh which had been written off as Bad.debts in the previous year was now recovered and had been posted to the personal Account of Rakesh.

e. Goods purchased for Rs.125 have been posted to the debit of the Supplier,Vinod & Co.

f. Furniture amounting to Rs.650 purchased on credit from quality Furniture Co. An entry for Rs.560 was passed in the Purchase Book.

g. Rest of Difference was due to a wrong total in Sales A/c in the ledger
Solution:

JOURNAL
 
      Rs.P. Rs. P.
(a) Repairs A/c Dr. 150.00  
  Ratio A/c Dr. 950.00  
      To PurchaseA/c
    To Govind Ram
(Amount payable for Repairs and the cost of new radio purchased wrongly passed through Purchases Book
    1,000.00
100.00
(b) Prepaid Insurance A/c Dr. 500.00  
      To Suspense A/c
(Prepaid Insurance A/c not Brought forward
    500.00
(c) Suspense A/c Dr. 1.91  
      To Customer A/c     1.91
  (Lesser amt posted to the cr of Customer A/c, now corrected      
(d) Rakesh Dr. 500.00  
      To Bad- debts recovered A/c     500.00
  (Bad-debts recovered, wrongly posted to the credit of Rakesh, now corrected      
(e) Suspense A/c Dr. 250.00  
  To Vinod & Co.     250.00
  (Amount wrongly debited to Vinod & Co. A/c instead of being credited, now corrected      
(f) Furniture A/c Dr. 650.00  
  To Purchase A/c     560.00
  To Quality Furniture Co.     90.00
  (The purchase of furniture for Rs.650 passed through purchase book as Rs.560)      
(g) Suspence A/c Dr. 434.00
  To Sales A/c      
         
 
 
(The different in Suspense A/c, being the amount of  undercasting of Sales A/c, now rectified )      

SUSPENSE ACCOUNT
 
  Rs.P.   Rs. P
To Customer A/c 1.91 By Difference in Trial Balance
To Vinod & Co. 250.00 By Prepaid Insurance      500.00
To Sales A/c (Balancing figure)    
  685.91             685.91
 

Notes:

  1. Trial balance shows an excess debit of Rs. 185.91.As such, the trial balance must have been tallied by placing the difference on the credit side of the suspense account. Hence the suspense account will show a credit balance.
  2. After passing all rectifying entries, suspense account still shows a credit balance of Rs.434.As stated in G item, this difference is due to a wrong total in account and will be rectified accordingly. G entry will be made after the preparation of suspense account.

 

 

 

 





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