trial balance

1. TRIAL BALANCE
PRESENTED BY- MR. AKSHAY M. KASAMBE
[N.S.P.MCOLLEGE OF PHARMACY DARWHA]
Email id- akshaykasambe@gmail.com
Contact No- 8237956745, 9172432197

2. INTRODUCTION
01
OBJECTIVE OF THE TRAIL
BALANCE
02
PREPARATION OF THE
TRIAL BALANCE
03
ACCOUNTING ERRORS
04
CONTENTS

3. INTRODUCTION
To ascertain the arithmetical
accuracy of the ledger accounts
To help in
locating errors
01 03
To help in the preparation
of final accounts
02
Before preparing the final accounts, it is necessary to test the accuracy of the individual postings in the
ledger. Under the double-entry book-keeping system the two aspects viz debit and credit of each transaction
must be recorded. An entry which is recorded on the debit side of one account is also recorded on the credit
side of some other account Hence, the amount on the debit side must be equal to the amount on the credit
side. Trial balance is a statement prepared to check the arithmetical accuracy of the book-keeping entries up
to the date stated at the head of the trial balance. Trial balance ensures that both the aspects of each
transaction have been duly recorded.
OBJECTIVE OF THE TRIAL BALANCE

4. 1.To ascertain the arithmetical accuracy of ledger accounts
As has been stated earlier, if the sum of the debit and credit columns of the trial balance tally, it is assumed that
the postings in the ledger account have been made correctly. It does not, however, mean that the individual
ledger accounts are also accurate since the following errors in the ledger accounts are not revealed by a trial
balance:-
A wrong entry in the ledger
Omission of an entry in the ledger
Posting of a transaction in wrong columns
Posting of correct amount but to a wrong account.
01
02
03
04
Such errors can be avoided only by exercising due care and caution while recording posting of transactions.

5. 2.To help in locating errors
When there are a large number of postings in a ledger and the trial balance does not tally, the following steps are
required to be taken to locate possible errors-
A recheck of the tally of "debits' and "credits' of the trial balance.
A recheck of the trial balance items with the ledger.
Rechecking the totals of ledger accounts and their balancing should be undertaken to see whether the
difference in totals is dụe to error in totalling/addition and balancing the ledger account.
To check whether there are any items in the books of original entry which do not have a ledger folio.
The difference may be due to omission of an entry either on debit or credit side of a transaction. For example, a
debit entry of say, Rs 2642 has been made in a transaction, the corresponding "credit entry has been omitted
through an oversight. To eliminate this possibility. it is necessary to carefully scan through all the credit entries to
see whether the corresponding credit entry of said amount has been made under this transaction.
If the difference between the 'debit' and 'credit' is divisible by 2, it is possible that posting of an account equal
to one-half of the difference may have been made on the wrong side of a ledger account. For example, if the total
of the debit side of the trial balance exceeds by say Rs 854, it is possible that through an oversight a credit item
of Rs 427 has been posted in the ledger as a debit. So all entries of Rs 427 be thoroughly scrutinised.
If the difference is of two digits (excluding zero) and their sum is a multiple of 9, the mistake is likely to be in
the transposition of figures. For example, if a debit of say Rs 1495 has been posted as Rs 1459, the credit side of
the trial balance will exceed by Rs 36. Thus, a difference in the trial balance divisible by 9 may help in detecting
the error by re-examining the entries

6. 3.To help in the preparation of the final accounts
The trial balance contains the list of all the ledger accounts with their debit and credit balances. So
while preparing the final accounts (financial statements) there is no need to refer to the ledger.
The financial statements can be easily prepared from a tallied trial balance. Similarly, the Trading
Account and the Profit and Loss Account can also be prepared from revenue and expense accounts
appearing in the Trial Balance.
Further more, the Balance Sheet can be prepared from the assets, liabilities capital, accounts
appearing in the trial balance.
PREPARATION OF THE TRIAL BALANCE
The trial balance may be prepared by employing any one of the following methods
BALANCE METHOD
TOTALAMOUNTS METHOD
01
02

7. 1.BALANCE METHOD
The debit and credit sides of each ledger account is totalled. The balance is then recorded on the debit or credit
side of the trial balance. If the grand total of debit and credit balances tally, it shows that the books are accurate
arithmetically.
particulars Balance
Dr Cr
Sales
Cash
Building
Purchases
Salaries
Insurances
Bank charges
Advertising
Interest paid on loan
Furniture
Carriage
Repair
Loan from bank
Discount allowed
Discount received
2,500.00
25,000.00
35,000.00
10,000.00
1,500.00
100.00
1,750.00
500.00
800.00
240.00
1,200.00
1,600.00
35,000.00
43,000.00
2,190.00
80,190.00 80,190.00
AK DRUG HOUSE
Trial balance as on 18St March 2021

8. 2.TOTALAMOUNTS METHOD
In this method the total on debit side of every ledger account is entered under the debit column of the trial
balance and the total on the credit side of each ledger account is recorded under the credit column of the trial
balance. A grand total of both debit and credit side is then taken. In case the grand totals on both sides tally, it
indicates arithmetical accuracy of the book However, if there is a difference between the grand total on the debit
and credit side, it shows that there is a mistake somewhere which needs rechecking
Particulars Debit totals Credit total
Capital A/c
Cash A/c
Ram Lal
Purchases
Bank
Furniture
Interest
Rent
Depreciation
Sales
16,000
5,000
28,000
12,000
9,500
1,500
2,500
50,000
8,000
5,000
4,000
7,500
74,500 74,500
AK MEDICAL HALL
Trial balance as on 18st March 2021

9. ACCOUNTING ERRORS
The main purpose of preparing trial balance is to test the arithmetical accuracy of the accounts
books. However it must be kept in mind that tallying of the trial balance does not mean that no errors
have been committed in the accounting records. We may remember that the following types of error
are not are not reflected in the trial balance-
COMPENSATING
ERRORS
ERROR OF
POSTING
ERROR OF
OMISSION
ERROR OF
PRINCIPLE
ERRORS OF
COMMISSION
01 02 03 04 05

10. 1.ERROR OF COMMISSION
These errors occur due to wrong posting (cither of an amount or on the wrong side of an account, or in
the wrong account), wrong totalling.
wrong balancing or wrong recording of an amount in the books of original entry etc.
It is also called clerical error These are generally committed by the clerical staff while recording of an
amount in the book of account.
For example, one Ram Lal receives say Rs 10,000 as payment for the material supplied. While this
has been correctly recorded in the cash book, as regards entry in the ledger, Ram Lal's account has been
debited with Rs 1000 only.
This is called an error of commission. The majority of errors of commission are reflected in the trial
balance,
2.ERROR OF OMISSION
Such errors occur if a transaction is omitted be recorded either entirely or partly in the books of
original entry or has not been posted in the ledger through an oversight.
For example, payment of say, Rs 1500 has been made to a particular supplier. Where in the cash book
an entry has been made on the credit side, its posting to the supplier's account in the ledger is omitted.
This is known as error of omission. Errors due to entire omission will not have any effect on the trial
balance but errors as a result of partial omission will affect the accuracy of the trial balance,

11. 3.ERROR OF PRINCIPLE
This type of error occurs when there is mistake in allocating a particular receipt or expense to capital or revenue
account.
As an illustration, if machinery purchased is debited to purchases account and building sold is credited to sales
account, an error of principle will occur.
However, the trial balance remains unaffected by such errors.
4.ERROR OF POSTING
These errors occur if posting is done to a wrong account though with correct amount and on correct side.
For example. a debit of say, Rs 5000 to one Ram Govind is wrongly posted to debit of Ram Gopal's account,
the trial balance will remain unaffected despite a wrong entry having been made.
When two or more errors are committed in such a way that they nullity the effect of each other on the
debit and credit side, these are called compensating errors.
As an illustration, an amount of Rs 20 instead of Rs 200 is debited to Suresh's account and Rs 200
instead of Rs 20 is debited to Dinesh's account.
Although there is an error in posting the accounts of Suresh and Dinesh in this case, it will have no
efféct on the trial balance because one error is compensated by another.
Whereas errors affecting only one account can be rectified by appending an explanatory note or by
passing a journal entry, errors which affect two or more accounts are rectified by passing a journal entry.
5.COMPENSATING ERROR

12. “A successful man is one
who can lay a firm
foundation with the bricks
others have thrown at him.”.
THANK
YOU
A.M.KASAMBE