151 The Journal Illustrations :3 Journalise the following transactions in the books of Panta and Sons Pvt. Ltd. for the month of Bhadra, 2075. 1, Business commenced with Rs. 1,00,000. 5, Deposited into bank Rs. 70,000. 8, Purchased furniture of Rs. 15,000. 11, Machinery purchased and paid by cheque 25,000. 15, Stationery purchased for Rs. 5,000. 22, Withdrawn from bank Rs. 10,000. 28, Salary paid by cheque Rs. 20,000. 29, Commission received Rs. 5,000. 30, Rent paid to the landlord Rs. 18,000. Solution Journal entries Panta & Sons Pvt. Ltd., for the month of Bhadra, 2075 Date Particulars L.F. Dr. Amt. Cr. Amt. 075-5-1 Cash A/c Dr. To Capital A/c (Being business commenced) 100,000/- 100,000/- 075-5-5 Bank A/c Dr. To Cash A/c (Being cash deposited into bank) 70,000/- 70,000/- 075-5-8 Furniture A/c Dr. To Cash A/c (Being furniture purchased) 15,000/- 15,000/- 075-5-11 Machinery A/c Dr. To Bank A/c (Being machinery purchased and paid by cheque) 25,000/- 25,000/- 075-5-15 Stationery A/c Dr. To Cash A/c (Being stationery purchased) 5,000/- 5,000/- 075-5-22 Cash A/c Dr. To Bank A/c (Being withdrawn from bank for office use) 10,000/- 10,000/-
152 Aakar’s Office Practice and Accountancy - 8 075-5-28 Salary A/c Dr. To Bank A/c (Being salary paid through bank) 20.000/- 20.000/- 075-5-29 Cash A/c Dr. To Commission received A/c (Being commission received) 5,000/- 5,000/- 075-5-30 Rent A/c Dr. To Cash A/c (Being rent paid to the landlord) 18,000/- 18,000/- Total 2,68,000/- 2,68,000/- Glossary Chronological : date wise order Memorandum book : Journal/Memory book Narration : Short explanation of transaction Compound : Joint/More than two effects in a transaction Liabilities : any payable amount to others. Purchase : buying of goods for selling purpose. Sales : selling of goods which are purchased for selling purpose. Exercise A. Fill in the blanks: 1. Increase in assets is ……………………… . 2. Decrease in liabilities is ………………………… . 3. Decrease in income is ……………………………. . 4. Increase in profit is ……………………… . 5. Journal is maintained in ……………………….. order. 6. The entry made in the original books is known as ………………….. . 7. Journal contains …………………. columns. B. Give very short answers to the following questions: 8. What is journal? 9. What is compound journal entry? C. Give short answers to the following questions: 10. What is journal? Write the objectives of preparing a journal. 11. Draw a specimen of journal and explain the columns in brief.
153 The Journal 12. Explain the steps of journalizing the transactions. 13. Describe the importance of journal. Or why is journal prepared? Explain. 14. Explain the types of journal entry with any two examples of each. PRACTICAL PROBLEMS CAPITAL AND DRAWING: 15. Journalize the following transactions in the book of Sharma Company. On 1st Baishakh, 2075, started business with Rs. 1,00,000. On 20th Baishakh, 2075, again invested money in the business with a bank balance of Rs. 5,00,000, cash of Rs. 50,000 and furniture of Rs. 70,000. On 23th Baishakh, 2075, withdrawn goods for personal use Rs. 200 from bank. On 25th Baishakh, 2075, withdrawn cash for paying fees of his son. PURCHASE AND SALES: 16. Journalize the following transactions. On 5th Jestha, 2074, goods purchased in cash Rs. 10,000. On 8th Jestha, 2074, goods purchased from A to Z company Rs. 20,000. On 10th Jestha, 2074, goods purchased from XYZ co. in cash Rs. 10,000. On 12th Jestha, 2074, goods sold in cash Rs. 6,000. On 15th Jestha, 2074, goods sold to Dinesh & Co. worth Rs. 5,000. On 20th Jestha, 2074, goods sold to Nabin Babu & Co. Rs. 10,000 in cash. RETURNS 17. Journalize the following transactions. On 2nd Asar, 2074, goods returned to A to Z company of Rs. 5,000. On 5th Asar, 2074, goods of Rs. 1,500 is returned to XYZ & Co. which was purchased in cash. On 10th Asar, 2074, cash sales returned of Rs. 1,000. On 15th Asar, 2074, Mr. Dinesh & Co. returned goods of Rs. 500. INCOME AND EXPENSES: 18. On 10th Asar, 2074, paid salary Rs. 10,000. On 11th Asar, 2074, paid telephone charge Rs. 1,000 by cheque. On 12th Asar, 2074, discount allowed to Dinesh and company Rs. 500. On 15th Asar, 2074, rent received Rs. 10,000. On 16th Asar, 2074, received Rs. 500 as commission. On 19th Asar, 2074, discount received from Hair & Co. Rs. 1,000.
154 Aakar’s Office Practice and Accountancy - 8 PURCHASE AND SALE OF ASSETS: 19. On 5th Asar, 2074, old machine was sold at Rs. 10,000. On 6th Asar, 2074, furniture purchased of Rs. 10,000 from Hari & Co. and paid Rs. 5,000 by cheque. On 7th Asar, 2074, computer sold to Krishan & Co. of Rs. 10,000. On 10th Asar, 2074, photocopy machine purchased Rs. 1,00,000. 20. Journalize the following transactions for the month of Bhadra, 2075: 1, Business established with cash investment of Rs. 10,50,000. 3, Deposited into bank Rs. 5.00,000. 4, Furniture purchased for Rs. 50,000. 6, Machineries purchased and paid by cheque Rs. 45,000. 7, Goods purchased from Panta Trading House of Rs. 150,000. 9, Stationery purchased for Rs. 15,000. 10, Paid for sundry expenses Rs. 30,000. 22, Cash sales made for Rs. 55,000. 25, Withdrawn cash from bank Rs.40,000. 30, Sold goods on credit to Sapkota Shopping Centre for Rs. 30,000. 21. Journalize the following transactions in the book of Ram Babu: 2075-7-1, Ram Babu commenced business with Rs. 10,00,000 2075-7-2, Deposited into bank Rs. 7,50,000. 2075-7-5, Purchased machines and paid by cheque Rs. 50,000. 2075-7-6, Cash purchase made for Rs. 25,000. 2075-7-8, Goods purchased from Laxman Babu Rs. 1,50,000. 2075-7-11, Purchased stationery for Rs 5,000. 2075-7-12, Cash sales made Rs. 50,000. 2075-7-14, Sold to Bhabilal Rs. 2,50,000. 2075-7-16, Deposited into bank Rs. 40,000. 2075-7-17, Payment made to Laxman Babu by cheque. 2075-7-19, Commission received Rs. 7,000. 2075-7-20, Loan taken from bank Rs. 60,000. 2075-7-22, Deposited into bank Rs. 50,000. 2075-7-23, Received from Mr. Bhabilal in full settlement of his debt Rs. 2,45,000. 2075-7-25, Wage and salary paid by cheque Rs. 40,000 and Rs. 30,000 respectively. 2075-7-29, Rent paid to the landlord for the month Rs. 20,000. 22. Journalize the following transactions in the books of Ramesh & Company. 1-1-2075, Commenced business with Rs. 100,000. 3-1-2075, Deposited into bank Rs. 80,000. 5-1-2075, Machinery purchased and paid by cheque Rs. 30,000. 7-1-2075, Paid for stationery Rs. 2,000.
155 The Ledger Unit 13 Learning Objectives After studying this unit, students will be able to : write the meaning of ledger, know the importance and objectives of ledger, know the types of ledger account, write difference between ledger and journal, know the rules of posting, know the balancing and closing the ledger, prepare different ledger accounts. The Ledger Dr. Cash A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-1 074-5-22 074-5-29 074-6-1 To Capital A/c To Bank A/c To Commission A/c To Balance b/d 100,000/- 10,000/- 5000/- 115000/- 7,000/- 074-5-5 074-5-8 074-5-15 074-5-30 074-5-30 By Bank A/c By Furniture A/c By Stationery A/c By Rent A/c By Balance c/d 70,000/- 15000/- 5000/- 18,000/- 7000/- 115000/-
156 Aakar’s Office Practice and Accountancy - 8 1. Introduction Journal shows the daily and periodical total of the debit and credit amounts in respect to their entries. It cannot provide the information in a classified manner as it is just a memorandum entry. The journal book cannot serve with the necessary information required to the businessman for ascertaining the true position of his firm’s affairs during a certain period. If the businessman wants to know the total effect on purchase, sales, debtors, creditors, cash, bank, expenses, income, etc. at the end of a fiscal year, he/she should scan the journal from the beginning to the end of the year. It is impossible to collect thousands of transactions relating to expenses incomes, debtors, creditors, cash, bank, etc. Thus, the businessman should prepare the book on the classified accounts by posting them from the identical journals to ascertain the final net effect of the separate headings of expenses, losses, incomes, gains, assets, capital and liabilities. According to J.R. Batliboi, “The ledger is the chief book of accounts, and it is in this book that all the business transactions would ultimately find their place under their accounts in a duly classified form.” The ledger is an individual record in which similar transactions of particular person, organization and things are recorded with the help of journal entries from journal book. As such, a ledger may be defined as the classified accounts prepared under each individual head of account by posting from the journal entries in order to ascertain the final net effect on them separately. The final net effect of the classified head of account is known as ledger balance and such ledger balances determine the profit or loss of an entry during a certain period and the financial position up to the date. Key Point Ledger is the classified accounts prepared under each individual head by posting the identical journal entries to ascertain the final net effect of each head. 2. Objectives and Importance of Ledger The following are the important objectives of a ledger: i. To know the position of debtors and creditors. ii. To know the total purchase and sales of a firm during a certain period. iii. To know the amount spent on each head of expenditure and losses during a certain period. iv. To know the amount earned on each head of income for a certain period. v. To facilitate to check the arithmetical/numerical errors through the preparation of trial balance.
157 The Ledger vi. To know the final net effect i.e. net balance of each head of expenses, losses, incomes, gains, assets, capital and liabilities which is the base for ascertaining the operational result i.e. profit or loss and financial position. 3. Type of Ledger Account The accounts affected by the transactions are summarized into ledger account as per their similarities. Ledger accounts are also classified into two groups. They are as follows: Personal ledger account Type of Ledger Account Impersonal ledger account Real account Nominal account A. Personal Ledger Account Personal account is related with an individual, firm and institution. When the credit transaction takes place, the name of the person should be mentioned for the record for future use due to incompleteness of the transactions. The personal ledger account is maintained to know how much is to be received and paid to the others. For example, if goods are sold to ABC on credit, we need to prepare the account of ABC. So ABC’s A/c is personal ledger account. B. Impersonal Ledger Account The account which is not related with person is called impersonal account and this is related with various transactions of other properties, expenses, income, profit, losses, etc. It is also classified into the following two groups: i. Real Account Real account is related with assets, properties, things and real objects. To know the condition of these properties, assets, etc. the real accounts are used. Machine A/c, Cash A/c, Furniture A/c, etc. are the examples of real account. ii. Nominal Account Nominal account is related with income, expenses, profit, loss, etc. It is used to find the total income and expenditure in different heads as well as gain or loss of the organization. Salary A/c, Profit A/c, Discount A/c, Rent A/c, Interest Received A/c, etc. are some examples of nominal account.
158 Aakar’s Office Practice and Accountancy - 8 4. Differences between Journal and Ledger Journal Ledger 1. It is a primary record of financial transactions. 1. It is the secondary entry of financial transactions. 2. It is prepared in chronological order or date wise. 2. It is recorded on ledger head wise basis. 3. It helps to prepare ledger. 3. It helps to prepare trial balance. 4. Recording of transactions in journal is called ‘Entry’. 4. Recording of transactions in ledger account is called ‘Posting’. 5. It contains the narration of transactions. 5. It is not necessary to give narration on it. 6. It contains only five columns. 6. It contains eight columns. 7. It does not provide the balance of an account. 7. It shows the balance of an account. 5. Specimen and Ruling of a Ledger The specimen ruling of a ledger account is given below. Dr. Ledger A/c of ....... Cr. Date Particulars J.F. Amt.(Rs.) Date Particulars J.F. Am. (Rs.) A ledger account is prepared in the shape of English letter ‘T’ having divided into two sides, i.e. the left hand side, known as ‘Dr. side’ and the right hand side, known as ‘Cr. side’. It has four columns in each side, i.e. date, particulars, J.F. and amount to mention the Dr. posting and Cr. posting as necessity. 6. Posting the Entry Posting is the act of transferring transactions from journal to ledger accounts. In other words, the act of classifying the financial transactions under certain title of account is called posting. Posting takes place with the help of journal entries. Rules of Posting The rules of posting in a ledger are mentioned below. i. Journalize the transactions at first. ii. Name of ledger is to be written on the top. iii. Left side must be indicated by `Dr.’ and right side by ‘Cr.”
159 The Ledger iv. Separate accounts should be opened for posting transaction relating to different accounts. v. Ruling into debit side: a. The date of the transaction is mentioned in the date column. b. Name of the account credited in the journal is mentioned in the particulars column on the debit side as, To (name of the account so credited.) c. Page number of the journal book of the account so posted is mentioned in the J.F. column, if any. It acts as an indexing. d. The given amount of the account so posted is mentioned in the amount column in Dr. side. vi. Ruling into credit side: a. The date of the transaction is mentioned in the date column. b. Name of the account debited in the journal is mentioned in the particulars column on the credit side as, By (name of the account so debited.) c. Page number of the journal book of the account so posted is mentioned in the J.F. column, if any. It acts as an indexing. d. The given amount of the account so posted is mentioned in the amount column in Cr. side. Considering the following example: On 2075-1-11, Ghana Shyam commenced business with Rs. 12,50,000. Solution: The journal entry is: Date Particulars L.F. Dr. Am t. (Rs.) Cr. Amt. (Rs.) 2075-1-11 Cash A/c Dr To Capital A/c (Being business commenced) 12,50,000/- 12,50,000/- The above journal entry suggests that Rs. 12,50,000/- is debited into Cash A/c and the same is credited in Capital A/c, as below: Dr. Cash A/c Cr. Date Particulars J.F. Amt. (Rs.) Date Particulars J.F. Amt. (Rs.) 2075-1-11 To Capital A/c 12,50,000/- Dr. Cash A/c Cr. Date Particulars J.F. Amt. (Rs.) Date Particulars J.F. Amt. (Rs.) 2075-1-11 By Cash A/c 12,50,000/-
160 Aakar’s Office Practice and Accountancy - 8 7. Balancing Ledger Accounts When the debit side and credit side of a ledger are completely posted from the set of journal entries, it is to be totalled by putting necessary amount in the required side. It is known as balancing ledger. The following are the procedures of balancing ledger accounts. Case - I Ascertain the totals of both the sides. If the totals are equal, it does not need to be balanced. The totals are determined and mentioned in the straight line horizontally and closed by two parallel lines as shown below. Dr. Cash A/c Cr. Dare Particulars J.F. Amt. (Rs.) Dare Particulars J.F. Amt. (Rs.) To Bank A/c 20,000/- 20,000/- By Salary A/c By Hari’s A/c 10,000/- 10,000/- 20,000/- Case - II Step :1 When debit total exceeds than credit total, it is called debit balance and the account is balanced by putting the necessary amount in the Cr. side by mentioning the words `By Balance c/d’. or, When the credit total exceeds than debit total, it is called credit balance and the account is balanced by putting the necessary amount in Dr. side by mentioning the words `To Balance c/d’. Note: Simply, the accounts relating to assets, expenses and losses have debit balance and those relating to capital, liabilities, incomes and gains have credit balance. Step :2 Determine the total on both sides and close by two horizontal parallel lines. Step :3 The debit balance should be brought down on the debit side as “To Balance b/d” in the particulars column with the 1st date of coming period in the date column. Similarly, the credit balance should be brought down on the credit side as “By Balance b/d” in the particulars column with the 1st date of the coming period. The date may also be the same as the end of the last period as of the closing balance date. Note: c/d = carried down b/d = brought down
161 The Ledger Illustration : 1 Prepare the ledger from the following transactions for the month of Bhadra, 2074: 1, Business commenced with Rs. 1,00,000. 5, Deposited into bank Rs. 70,000. 8, Purchased furniture of Rs. 15,000. 11, Machinery purchased and paid by cheque Rs. 25,000. 15, Stationery purchased for Rs. 5,000. 22, Withdrawn from bank Rs. 10,000. 28, Salary paid by cheque Rs. 20,000. 29, Commission received Rs. 5,000. 30, Rent paid to the landlord Rs. 18,000. Solution: Necessary accounts to be prepared: Cash A/c Stationery A/c Capital A/c Salary A/c Bank A/c Commission A/c Furniture A/c Rent A/c Machinery A/c Dr. Cash A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-1 074-5-22 074-5-29 074-6-1 To Capital A/c To Bank A/c To Commission A/c To Balance b/d 100,000/- 10,000/- 5000/- 115000/- 7,000/- 074-5-5 074-5-8 074-5-15 074-5-30 074-5-30 By Bank A/c By Furniture A/c By Stationery A/c By Rent A/c By Balance c/d 70,000/- 15000/- 5000/- 18,000/- 7000/- 115000/- Dr. Capital A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-30 To Balance c/d 100,000/- 100,000/- 074-5-1 074-6-1 By Cash A/c By Balance b/d 100,000/- 100,000/- 100,000/-
162 Aakar’s Office Practice and Accountancy - 8 Dr. Bank A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-5 074-6-1 To Cash A/c Ta Balance b/d 70,000/- 70,000/- 15,000/- 074-5-11 074-5-22 074-5-28 074-5-30 By Machinery A/c By Cash A/c By Salary A/c By Balance c/d 25,000/- 10,000/- 20,000/- 15,000/- 70,000/- Dr. Furniture A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-8 074-6-1 To Cash A/c By Balance b/d 15,000/- 15,000/- 15,000/- 074-5-30 By Balance c/d 15,000/- 15,000/- Dr. Machinery A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-11 074-6 -1 To Bank A/c To Balance b/d 25,000/- 25,000/- 25,000/- 074-5-30 By Balance b/d 25,000/- 25,000/- Dr. Stationery A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-15 074-6-1 To Cash A/c By Balance b/d 5,000/- 5,000/- 5,000/- 074-5-30 By Balance c/d 5,000/- 5,000/- Dr. Salary A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-28 074-6-1 To Cash A/c By Balance b/d 20,000/- 20,000/- 20,000/- 074-5-30 By Balance c/d 20,000/- 20,000/- Dr. Commission A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-3 To Balance c/d 5,000/- 5,000/- 074-5-29 074-6-1 By Cash A/c By Balance b/d 5,000/- 5,000/- 5,000/-
163 The Ledger Dr. Rent A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 074-5-30 074-6-1 To Cash A/c To Balance b/d 18,000/- 18,000/- 18,000/- 074-5-30 By Balance c/d 18,000/- 18,000/- Illustration : 2 Prepare the ledger from following transactions for the month of Marga, 2075: 2075-8-1, Ramesh Sapkota commenced business with Rs. 10,00,000. 2075-8-2, Deposited into bank Rs. 7,50,000. 2075-8-5, Purchased machines and paid by cheque Rs. 50,000. 2075-8-6, Cash purchase for Rs. 25,000. 2075-8-8, Goods purchased from Hari Babu Pariyar Rs. 1,50,000. 2075-8-11, Purchased stationery for Rs 5,000. 2075-8-12, Cash sales made Rs. 50,000. 2075-8-14, Sold to Bhim Gurung Rs. 2,50,000. 2075-8-16, Deposited into bank Rs. 40,000. 2075-8-17, Payment made to Hari Babu Pariyar by cheque. 2075-8-19, Commission received Rs. 7,000. 2075-8-20, Loan taken from bank Rs. 60,000. 2075-8-22, Deposited into bank Rs. 50,000. 2075-8-23, Received from Mr. Gurung in full settlement of his debt Rs. 2,45,000. 2075-8-25, Wage and salary paid by cheque Rs. 40,000 and Rs. 30,000 respectively. 2075-8-29, Rent paid to the landlord for the month Rs. 20,000. Necessary accounts to be prepared : Cash A/c Capital A/c Bank A/c Machinery A/c Purchase A/c Stationery A/c Sales A/c Bhim Gurung A/c Commission A/c Bank loan A/c Wages A/c Discount A/c Salary A/c Rent A/c Hari Babu Pariyar A/c
164 Aakar’s Office Practice and Accountancy - 8 Solution Dr. Cash A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-1 075-8-12 075-8-19 075-8-20 075-8-23 075-9-1 To Capital A/c To Sales A/c To Commission A/c To Bank loan A/c To Bhim Gurung A/c To balance b/d 10,00,000/- 50,000/- 7000/- 60,000/- 245,000/- 1362,000/- 472000/- 075-8-2 075-8-6 075-8-11 075-8-16 075-8-22 075-8-29 075-8-30 By Bank A/c By Purchase A/c By Stationery A/c By Bank A/c By Bank A/c By Rent A/c By Balance c/d 750,000/- 25,000/- 5,000/- 40,000/- 50,000/- 20,000/- 472,000/- 1362,000/ Dr. Capital A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-30 To Balance c/d 10,00,000/- 10,00,000/- 075-8-1 075-9-1 By Cash A/c By Balance b/d 10,00,000/- 10,00,000/- 10,00,000/- Dr. Bank A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-2 075-8-16 075-8-22 075-9-1 To Cash A/c To Cash A/c To Cash A/c To Balance b/d 750,000/- 40,000/- 50,000/- 840,000/- 570,000/- 075-8-5 075-8-17 075-8-25 075-8-25 075-8-30 By Machinery A/c By Hari Babu’s A/c By Wages A/c By Salary A/c By Balance c/d 50,000/- 150,000/- 40,000/- 30,000/- 570,000/- 840,000/- Dr. Machinery A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-5 075-9-1 To Bank A/c To Balance b/d 50,000/- 50,000/- 50,000/- 075-8-30 By Balance c/d 50,000/- 50,000/- Dr. Hari Babu Pariyar’s A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-17 To Bank A/c 150,000/- 150,000/- 075-8-8 By Purchase A/c 150,000/- 150,000/-
165 The Ledger Dr. Purchase A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-6 075-8-8 075-9-1 To Cash A/c To Hari Babu’s A/c To Balance b/d 25,000/- 150,000/- 175 000/- 175 000/- 075-8-30 By Balance c/d 175,000/- 175 000/- Dr. Stationery A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-11 075-9-1 To Cash A/c To Balance b/d 5,000/- 5,000/- 5,000/- 075-8-30 By Balance c/d 5,000/- 5,000/- Dr. Sales A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-30 To Balance c/d 300,000/- 300,000/- 075-8-12 075-8-14 075-9-1 By Cash A/c By Bhim Gurung A/c By Balance b/d 50,000/- 250,000/- 300,000/- 300,000/- Dr. Bhim Gurung’s A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-14 To Sales A/c 250,000/- 250,000/- 075-8-23 075-8-23 By Cash A/c By Discount A/c 245,000/- 5,000/- 250,000/- Dr. Commission A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-30 To Balance c/d 7,000/- 7,000/- 075-8-12 075-9-1 By cash A/c By Balance b/d 7,000/- 7,000/- 7,000/- Dr. Bank Loan A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-30 To Balance c/d 60,000/- 60,000/- 075-8-20 075-9-1 By cash A/c By Balance b/d 60,000/- 60,000/- 60,000/-
166 Aakar’s Office Practice and Accountancy - 8 Dr. Discount A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-23 075-9-1 To Bhim Gurung A/c To Balance b/d 5,000/- 5,000/- 5,000/- 075-8-30 By Balance b/d 5,000/- 5,000/- Dr. Wages A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-25 075-9-1 To Bank A/c To Balance b/d 40,000/- 40,000/- 40,000/- 075-8-30 By Balance b/d 40,000/- 40,000/- Dr. Salary A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-25 075-9-1 To Bank A/c To Balance b/d 30,000/- 30,000/- 30,000/- 075-8-30 By Balance b/d 30,000/- 30,000/- Dr. Rent A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 075-8-29 075-9-1 To Cash A/c To Balance b/d 20,000/- 20,000/- 20,000/- 075-8-30 By Balance b/d 20,000/- 20,000/- Glossary Scan : look from the beginning Posting : recording the transaction from journal to ledger Exceed : be more Errors : mistakes Chronological : date wise Ledger : summarize record of financial transaction of particular account Credit balance : excess of credit over debit amount Debit balance : excess of debit over credit amount
167 The Ledger Exercise 1. What is ledger? 2. Write the rules of posting. 3. Describe the balancing of ledger. 4. ‘Journal is a subsidiary book whereas ledger is the principal book of a business house.’ Comment. 5. Describe, in brief, the importance of a ledger. 6. Explain the types of ledger account with examples. 7. Write any five differences between journal and ledger. 8. Classify the following account into personal account, real account, and nominal account. Sumita A/c, Cash A/c, Land A/c, Creditors A/c, Capital A/c, Bank A/c, Debtor A/c, Sales A/c, Purchase A/c, Rent A/c, Commission A/c, ABC’s A/c, Ram’s A/c. PRACTICAL PROBLEMS 9. Journalize the following transactions and prepare the necessary ledger accounts. On 1-1-2074, commenced business with Rs. 100,000. On 3-1-2074, deposited into bank Rs. 80,000. On 5-1-2074, machinery purchased and paid by cheque Rs. 30,000. On 7-1-2074, paid for stationery Rs. 2,000. 10. Journalize the following transactions for the month of Bhadra, 2075 and post them into the ledger accounts. 1, Business established with cash investment of Rs. 1,50,000. 3, Deposited into bank Rs. 1.00,000. 4, Furniture purchased for Rs. 20,000. 6, Machineries purchased and paid by cheque Rs. 35,000. 7, Goods purchased from Krishna Trading House of Rs. 40,000. 9, Stationery purchased for Rs. 5,000. 10, Paid for sundry expenses Rs. 3,000. 12, Cash sales made for Rs. 35,000. 13, Withdrawn cash from bank Rs. 20,000. 15, Sold goods on credit to Thapa Shopping Centre for Rs. 50,000.
168 Aakar’s Office Practice and Accountancy - 8 11. The following transactions are given to you. On 2075-9-5, business started with Rs. 200,000. On 2075-9-6, deposited into bank Rs. 120,000. On 2075-9-8, goods purchased for Rs. 30,000 from Bhimsen partial payment of Rs. 20,000 made through bank. On 2075-9-10, motor car purchased from CMC Traders of Rs. 50,000. On 2075-9-11, paid to Bhimsen Rs. 9,500 for the full settlement of his account. Required a. Journal entries b. Ledger posting 12. Journalize the following transactions and prepare the necessary ledger: Chaitra, 2075. 1, Business commenced with Rs. 500,000. 4, Loan taken from bank Rs. 100,000. 5, Deposited into bank Rs. 450,000. 8, Furniture purchased for Rs. 50,000. 11, Machinery purchased from ABC Enterprises of Rs. 80,000. 12, Goods purchased from PQR Rs. 70,000. 15, Withdrawn from bank for private use Rs. 10,000. 18, Paid for entertainment expenses Rs. 2000. 19, Sold to XYZ of Rs 140,000. 22, Paid to PQR Rs. 68,000 and discount received Rs. 2000. 26, Paid rent by cheque Rs. 60,000. 29, Received from XYZ Rs. 1,35,000 in their full settlement.
169 Trial Balance Unit 14 Learning Objectives After studying this unit, students will be able to : write the meaning of trial balance, know the objectives and advantages of trial balance, know the rules of a trial balance, write the considerations of a trial balance, know the accounting errors in trial balance, prepare different trial balance. Trial Balance List of possible items shown in trial balance S.N. Particulars L.F. Debit amount Credit amount Reasons 1 Opening stock ×××× Expenses 2 Purchase ×××× Expenses 3 Sales return ×××× Decrease in sales 4 Traveling expenses ×××× Expenses 5 Cash ×××× Assets 6 Bank ×××× Assets 7 Commission expenses ×××× Expenses 8 Bad debt ×××× Loss/Expenses 9 Wages ×××× Expenses 10 Rent ×××× Expenses 11 Salary ×××× Expenses 12 Allowance ×××× Expenses 13 Land & building ×××× Assets 14 Machinery and plant ×××× Assets 15 Furniture ×××× Assets 16 Motor ×××× Assets 17 Adm. & office expenses ×××× Expenses 18 Patent ×××× Assets 19 Bills receivable ×××× Assets 20 Investment ×××× Assets 21 Depreciation ×××× Expenses 22 Custom, tax &fees ×××× Expenses 23 Debtor ×××× Assets 24 Interest expenses ×××× Expenses 25 Insurance & Advertisement ×××× Expenses 26 Phone & post expenses/ electricity ×××× Expenses 27 Printing, transportation & fuel ×××× Expenses 28 Capital ×××× Capital 29 Purchase return ×××× Decrease in purchase 30 Sales ×××× Revenue 31 Interest received ×××× Income 32 Bank overdraft ×××× Liabilities 33 Commission received ×××× Income 34 Rent received ×××× Income 35 Discount received ×××× Income 36 Creditor ×××× Liabilities 37 Loan and bills payable ×××× Liabilities 38 Reserves ×××× Capital 39 Advance income ×××× Liabilities 40 Carriage inward ×××× Expenses 41 Cartage ×××× Expenses 42 Audit fees ×××× Expenses 43 Legal charges ×××× Expenses 44 Sampling expenses ×××× Expenses 45 Discount ×××× Expenses 46 Commission ×××× Expenses 47 Export duty ×××× Expenses 48 Repair & maintains ×××× Expenses 49 Charity donation ×××× Expenses 50 Bank charge ×××× Expenses 51 Sales tax ×××× Expenses 52 Loss by incident ×××× Loss 53 Drawings ×××× Decrease in capital 54 Goodwill ×××× Assets 55 Accrued income ×××× Assets 56 Income from investment ×××× Income 57 Dividend received ×××× Income 58 Miscellaneous receipts ×××× Income 59 Outstanding expenses ×××× Liabilities Total ×××× ××××
170 Aakar’s Office Practice and Accountancy - 8 1. Introduction The dual concept is one of the fundamentals of accounting theory. According to double entry system, the total of debit and the total of credit should be equal. So at the end of month, quarter, half year and year, a statement is prepared with the help of ledger balances to find out/see whether or not the two totals are equal, such a statement is called trial balance. A trial balance is a list of the ledger accounts prepared at a specified date showing their debit or credit balances and thus to see the sum total of debit side and credit side respectively. It should be noted that this list of ledger balances can only be prepared when they are completed. It is the way of checking arithmetical accuracy of the books of accounts. In the words of M.S. Gosav, “ Trial balance is a statement containing the balances of all the ledger accounts as at any given date arranged in the form of debit and credit columns, placed side by side and prepared with the object of checking the arithmetical accuracy of the ledger posting.” In the words of Dr. A. N. Agrawal, “A trial balance is a statement of the debit and credit balances of the various ledger accounts, which is prepared to check their arithmetic accuracy.” From the above meaning and definitions, it is learnt that a trial balance possesses the following essentials: i. It is the list of all the ledger balances of a business house during a certain period. ii. It is prepared on a specified date. iii. It is prepared to check the arithmetical accuracy of the books of account. iv. Debit and credit totals must be equal. If the totals are not equal, there may be mistakes. Even though it helps to check the arithmetical accuracy of the books of account, it is not a conclusive proof of their overall accuracy. Key Point Trial balance may be defined as a statement of the ledger accounts of a business in terms of their balances on a certain specified period to check the arithmetic accuracy of the books of account. 2. Objectives of Trial Balance A trial balance is an important tool of the financial administration in checking the arithmetical accuracy of the subsidiary and the principal books of account. It is an important base for the preparation of the final accounts. The important objectives of a trial balance are briefly discussed below: i. To check the balance of journal and ledger ii. To check the arithmetical accuracy
171 Trial Balance iii. To facilitate the preparation of the final accounts iv. To serve as an aid to the management v. To help in auditing 3. Advantages of Trial Balance i. It helps to check the accuracy of journal & ledger. ii. It helps to correct the arithmetical errors. iii. It helps to find out errors of double posting. iv. It helps for internal audit. v. It helps to prepare final account. 4. Specimen and Ruling of a Trial Balance Simply, a trial balance is a statement of the ledger balances taken for a specified period. It is prepared on a plain paper, not specific. The debit balances are mentioned in the debit column and the credit balances in the credit column. The specimen ruling of a trial balance is as follows. “Trial Balance of Co. As on ........................” S.N. Particulars L.F. Dr. Balance Cr. Balance (1) (2) (3) (4) (5) Total i. Since a trial balance is prepared at any given date, its heading should always be mentioned as: “Trial Balance of ................. Co. As on .........................” ii. The serial numbers of the ledger heading are respectively mentioned in the first column. iii. The ledger accounts in respect of the serial number are mentioned in the 2nd column irrespective of the debit or credit balances on them. iv. Page numbers of the respective ledger accounts are mentioned in the 3rd column, if any. v. The amount of the debit or credit balance is respectively mentioned in the 4th and 5th, columns. But sometimes the debit and credit totals may be mentioned in the respective 4th and 5th columns when trial balance is prepared on total method. vi. Finally, the totals of debit side and credit side are determined to see whether the two totals are equal.
172 Aakar’s Office Practice and Accountancy - 8 5. Considerations of a Trial Balance Even though a trial balance is a simple list or statement of ledger balances on a certain specified date, one should consider the following important points. i. Since a trial balance is completely based on the ledger accounts, all the ledgers should be duly prepared. ii. The heading of a trial balance should be mentioned on the top middle of the page “Trial Balance of ................. Co. As on .........................” iii. The table having five different columns should be drawn, the first is of “S. No.” i.e. serial Number. The S. No. continues as 1, 2, 3, 4, 5, ...... and so on according to the number of ledger heads. iv. A trial balance can be prepared on the basis of total figures or balance figures of the ledger accounts. Thus, the debit and credit totals of the ledgers should be determined along with the balancing of the accounts. v. The ledger accounts should be mentioned along with their serial number so as to facilitate the counting. It helps to find out whether or not any ledger account is omitted. vi. The respective ledger page number of the accounts should be mentioned if any in the L.F. column to facilitate the reference of the required ledger. vii. All assets, expenses and losses have debit balances and so they are to be debited in trial balance. Capital, liabilities, incomes and gains have credit balances and thus are to be credited in it. Dr. = All assets, expenses and losses Cr. = All capital, liabilities, incomes and gains viii. After mentioning all the ledger accounts in the trial balance, its debit and credit sides should be separately totalled to see whether or not they are equal. ix. When the two totals of a trial balance are equal, it is supposed that the books of account are arithmetically accurate; otherwise the books of accounts should be thoroughly revised as far as possible to locate the arithmetic errors. x. When the errors cannot be detected, and there it becomes a problem to proceed onward for the preparation of final accounts. In such a case, an account called a ‘suspense account’ is opened for the adjustment of the trial balance. The suspense account is opened for that side where there’s a shortage of amount and totals are made equal and proceeded onward to prepare final accounts. After finding the errors, errors are to be detected and corrected by passing journal and suspense account is removed from the trial balance.
173 Trial Balance 6. Accounting Errors in Trial Balance There may be some unintentional and sometimes intentional errors committed by the accounting staff or by management in the process of book-keeping and accounting. Such mistakes are known as book-keeping errors or accounting errors. The accounting errors have been classified into two broad categories from trial balance point of view. They are: (i) errors that can be disclosed by a trial balance and (ii) errors that cannot be disclosed by a trial balance. Each of them is discussed below. A. Errors Disclosed by a Trial Balance When the two sides of trial balance fail to agree, the books of account are not regarded as arithmetically accurate. The debit and credit totals of a trial balance do not agree because of some errors and the disagreement of its two totals locates the arithmetical errors. Hence, the following errors can be disclosed by a trial balance by means of the disagreement of the two side totals: i. Errors of wrong totalling of subsidiary books. ii. Error of posting on the wrong side of a ledger in over or under casting an amount while posting into ledger. iv. Errors of double posting in one side of a ledger. v. Errors of omission of posting on one side of a ledger. vi. Errors of totalling and balancing the account in the trial balance. vii. Omission of any ledger account in the trial balance. viii. Errors of mentioning the balance of any ledger in the wrong side of trial balance. ix. Errors in the totalling of the trial balance itself. B. Errors not Disclosed by Trial Balance The agreement of a trial balance proves only the arithmetic accuracy of the books of account. Thus, it should not be taken as the conclusive proof of the entire accuracy because there are still some errors which remain unaffected by the agreement of trial balance. Such errors are known as errors not disclosed by trial balance. They are as given below. i. Errors of Omission If a transaction is not recorded in the book of original entry, both the debit and credit aspects of the transaction will be omitted. This error will not affect the trial balance. For example, if goods sold to Dahal Bros. of Rs. 6,000, is not recorded in the books at all, i.e. neither debited in Dahal Bros. A/c nor credited in sales A/c, it will not affect the totals of the trial balance. It is because there’s omission of Rs. 6,000 on both sides. Thus, this type of error cannot be disclosed by a trial balance.
174 Aakar’s Office Practice and Accountancy - 8 ii. Errors of Commission It is the committed error. This type of error takes place when an imaginary transaction is entered in the original book of account or when wrong amount is posted in both of the accounts. It will not make any difference in the totalling of trial balance. For example, when an unreal transaction of any value is entered in the original book, it increases both the sides of the trial balance with the same amount and do not create the disagreement. The mentioning of wrong amount of a transaction in the original book is also an error of commission, e.g. payment of salary Rs. 5,300 may be entered in the original book in as Rs. 3,500 in both sides. Similarly, the under-casting of any expense or over/under-casting of any income, etc. cannot be revealed by the trial balance. iii. Compensating Errors When the effect of one error is neutralised by the effect of another error, such an error is called compensating error. For example, forgetting to post Rs. 5000 on the debit side of certain account may be compensated/neutralised by under casting Rs. 5000 on the credit side of the same or another account. Since the first error is neutralised by second error, it does not affect the trial balance in numerical total and thus such errors cannot be revealed by a trial balance. iv. Errors of Principle When the fundamental principle of accountancy has not been followed while recording a business transaction, it is to be an error of principle. Such an error occurs when an expense is treated as asset or an asset as expense or an income as liability or a liability as an income, etc. Similarly, it occurs, when an account to be debited is credited and vice versa. For example, when salary A/c is credited and cash A/c is debited for the payment of salary, it is said to be an error of principle. This does not affect the totals of trial balance because the amount is allocated to both sides to the same extent. Thus, the trial balance cannot disclose such type of errors. v. Errors of Posting in the Wrong Account It is posting of any transaction made in the wrong account but in the correct side, the errors will not affect the total balance of trail balance. For example, machinery purchased from Suman for Rs. 10,000 is credited to Raman account in the ledger. In this case, trail balance will agree but it is error. 7. List of possible items shown in trial balance. S.N. Particulars L.F. Debit amount Credit amount Reasons 1 Opening stock ×××× Expenses 2 Purchase ×××× Expenses
175 Trial Balance 3 Sales return ×××× Decrease in sales 4 Traveling expenses ×××× Expenses 5 Cash ×××× Assets 6 Bank ×××× Assets 7 Commission expenses ×××× Expenses 8 Bad debt ×××× Loss/ Expenses 9 Wages ×××× Expenses 10 Rent ×××× Expenses 11 Salary ×××× Expenses 12 Allowance ×××× Expenses 13 Land & building ×××× Assets 14 Machinery and plant ×××× Assets 15 Furniture ×××× Assets 16 Motor ×××× Assets 17 Adm. & office expenses ×××× Expenses 18 Patent ×××× Assets 19 Bills receivable ×××× Assets 20 Investment ×××× Assets 21 Depreciation ×××× Expenses 22 Custom, tax &fees ×××× Expenses 23 Debtor ×××× Assets 24 Interest expenses ×××× Expenses 25 Insurance & Advertisement ×××× Expenses 26 Phone & post expenses/ electricity ×××× Expenses 27 Printing, transportation & fuel ×××× Expenses 28 Capital ×××× Capital 29 Purchase return ×××× Decrease in purchase 30 Sales ×××× Revenue 31 Interest received ×××× Income 32 Bank overdraft ×××× Liabilities 33 Commission received ×××× Income 34 Rent received ×××× Income 35 Discount received ×××× Income 36 Creditor ×××× Liabilities 37 Loan and bills payable ×××× Liabilities 38 Reserves ×××× Capital
176 Aakar’s Office Practice and Accountancy - 8 39 Advance income ×××× Liabilities 40 Carriage inward ×××× Expenses 41 Cartage ×××× Expenses 42 Audit fees ×××× Expenses 43 Legal charges ×××× Expenses 44 Sampling expenses ×××× Expenses 45 Discount ×××× Expenses 46 Commission ×××× Expenses 47 Export duty ×××× Expenses 48 Repair & maintains ×××× Expenses 49 Charity donation ×××× Expenses 50 Bank charge ×××× Expenses 51 Sales tax ×××× Expenses 52 Loss by incident ×××× Loss 53 Drawings ×××× Decrease in capital 54 Goodwill ×××× Assets 55 Accrued income ×××× Assets 56 Income from investment ×××× Income 57 Dividend received ×××× Income 58 Miscellaneous receipts ×××× Income 59 Outstanding expenses ×××× Liabilities Total ×××× ×××× 8. Illustrative Problems and Solutions Illustration : 1 From the following balances taken from the books of Sanokaji & Co. as on 31st Ashwin, 075, prepare a trial balance. Heads of account Amount (Rs) Heads of account Amount (Rs) Cash Sundry debtors Salaries & wages Capital Sales Freight Discount earned Furniture 10,000 21,600 2,700 50,000 48,500 4,000 450 2,500 Commission paid Purchases Carriage inward Sundry creditors Drawings Return outwards Bank Machinery 150 20,000 3,000 5,000 6,000 2,000 9,000 27,000
177 Trial Balance Solution: Trial Balance of Sanokaji & Co, as on 31st Ashwin, 075 S.No Particulars L.F. Dr. Balance Cr. Balance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Cash Sundry debtors Salaries & wages Capital Sales Freight Discount earned Furniture Commission paid Purchases Carriage inward Sundry creditors Drawings Return outwards Bank Machinery 10,000 21,600 2,700 - - 4,000 - 2,500 150 20,000 3,000 - 6,000 - 9,000 27,000 - - - 50,000 48,500 - 450 - - - - 5,000 - 2,000 - - Total: 1,05 950 1,05,950 Illustration : 2 The following balances were extracted from the books of Bharatmani Bros. as on 31st Kartik, 075, prepare a trial balance: Heads of account Balance (Rs) Heads of account Balance (Rs) Capital Business premises Furniture & fixtures Plant and machinery Purchases Sales Return inwards Return outwards Carriage inward Carriage outward Commission received 60,000 35,000 13,500 46,000 78,000 1,30,000 1,500 2,000 1,400 1,100 500 Discount allowed Wages Insurance & rates Sundry creditors Sundry debtors Drawings Bills payable Cash in hand Bank overdraft 600 17,000 1,200 22,000 34,000 3,000 4,000 1,500 15,300
178 Aakar’s Office Practice and Accountancy - 8 Solution: Trial Balance of Bharatmani Bros, as on 31st Ashwin, 075 S.N. Particulars L.F. Dr. Balance Cr. Balance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Capital Business premises Furniture & fixtures Plant and machinery Purchases Sales Return inwards Return outwards Carriage inward Carriage outward Commission received Discount allowed Wages Insurance & rates Sundry creditors Sundry debtors Drawings Bills payable Cash in hand Bank overdraft - 35,000 13,500 46,000 78,000 - 1,500 - 1,400 1,100 - 600 17,000 1,200 34,000 3,000 - 1,500 - 60,000 - - - - 1,30,000 - 2,000 - - 500 - - - 22,000 - - 4,000 - 15,300 Total 2,33,800 2,33,800 Illustration : 3 From the following balances, prepare a trial balance as on 30th Bhadra, 075, in the books of LNS Co. Pvt. Ltd. Heads of account Balance (Rs) Heads of account Balance (Rs) Bills receivables Rent Opening stock Building Loan Purchases Interest Bills payable Sales return Tax and insurance 13,000 7,000 5,500 25,000 20,000 35,000 3,000 10,500 5,000 1,500 Capital Debtors Creditors Bank overdraft Sales Wages Cash Machinery Purchase returns Dividend (Cr.) 60,000 22,000 20,000 12,000 58,000 13,000 5,000 50,000 3,500 1,000
179 Trial Balance Solution: Trial Balance of LNS Co. Pvt. Ltd, as on 31st Bhadra, 075 S.N. Particulars L.F. Dr. Balance (Rs.) Cr. Balance (Rs.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Bills receivables Capital Rent Debtors Opening stock Creditors Building Bank overdraft Loan Sales Purchases Wages Interest Cash Bills payable Machinery Sales returns Purchase returns Tax and insurance Dividend (Cr.) 13,000 - 7,000 22,000 5,500 - 25,000 - - - 35,000 13,000 3,000 5,000 - 50,000 5,000 - 1,500 - - 60,000 - - - 20,000 - 12,000 20,000 58,000 - - - - 10,500 - - 3,500 - 1,000 Total 1,85,000 1,85,000 Illustration : 4 From the following ledger balances of Dinesh Murti Company, prepare a trial balance as on 31st Shrawan, 075: Heads of account (Rs) Heads of account (Rs) Opening stock Carriage Printing and stationery Machinery Furniture Rent and taxes Sales return Debtors Cash at bank Purchase returns Bills payables 4,000 500 400 13,000 15,000 4,000 1,500 8,000 18,000 800 4,000 Purchase Insurance Dividend received Discount (Cr) Land and building Creditors Salaries Cash in hand Sales Bills receivables Capital 10,000 600 2,550 150 20,000 7,000 7,000 5,000 22,000 4,500 75,000
180 Aakar’s Office Practice and Accountancy - 8 Solution: Trial Balance of Dinesh Murti Co., as on 31st Sharawan, 075 S.N. Particulars L.F. Dr. Balance Cr. Balance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Opening stock Purchase Carriage Insurance Printing and stationery Dividend received Machinery Discount (Cr) Furniture Land and building Rent and taxes Creditors Sales return Salaries Debtors Cash in hand Cash at bank Sales Purchase returns Bills receivables Bills payables Capital 4,000 10,000 500 600 400 - 13,000 - 15,000 20,000 4,000 - 1,500 7,000 8,000 5,000 18,000 - - 4,500 - - - - - - - 2,550 - 150 - - - 7,000 - - - - - 22,000 800 - 4,000 75,000 Total 1,11,500 1,11,500 Glossary Subsidiary book : additional book where credit purchase, credit sales, return and cash transactions are recorded. Omission : lapse Accuracy : exactness/equal Rectified : corrected Revealed : found Frauds : the errors which are committed intentionally Suspense account : an artificial account opened in the lighter side of trial balance to make a balance equal Adjustment and closing : an artificial process of closing the trial balance
181 Trial Balance Exercise 1. Define a trial balance and mention its importance. 2. Mention the specimen rulings of a trial balance. 3. Write the objectives of trial balance. 4. Mention the important considerations of a trial balance. 5. What is accounting error? What are its types from trial balance point of view? Mention. 6. Mention the errors that can be revealed by a trial balance. 7. Describe the errors that cannot be revealed by a trial balance, with suitable examples. 8. Write short notes on the following: a. Suspense account b. Errors of principle c. Debit and credit items of trial balance. PRACTICAL PROBLEMS 9. From the following balance extracted from the ledger accounts of ABC Co. as on 30th Chaitra, 2074, prepare a trial balance. Particulars Rs. Particulars Rs. Capital Sundry creditors Sundry debtors Land and building Opening stock Wages Rent Advertising Office expenses Commission (Dr.) 60,000 30,800 22,500 26,000 15,500 25,000 4,000 3,000 6,400 1,400 Drawing Cash in hand Plant and machinery Purchase Carriage Salary Sales Printing and stationery Discount (Cr.) Bad debts 2,500 4,250 20,000 65,000 1,100 9,000 1,21,000 5,800 800 1,150 Ans: Total Rs. 2,12,600
182 Aakar’s Office Practice and Accountancy - 8 10. Prepare a trial balance from the following information of ABC Co., Jestha, 2075. Particulars Rs. Particulars Rs. Suresh’s capital Leasehold premises Purchase return Cash in hand Rent, rates and taxes Purchase Trade expenses Opening stock 15,560/- 7,410/- 2,640/- 1,420/- 4,650/- 12,680/- 7,840/- 2,640/- Suresh’s drawing Customers Creditors Salary and wages Sales Loan from bank Bills payable Sales return 5,640/- 5,300/- 5,280/- 5,980/- 27,560/- 2,500/- 1,000/- 980/- Ans: Total Rs. 54,540/- 11. The following balance information was extracted from the books of Suman Bro. as on 31st Bhadra, 075. Prepare a trial balance. Ledger heads Amt (Rs.) Ledger heads Amt (Rs.) Capital Cash in hand Cash at Bank Stock (1-5-075) Purchase Bad debt Carriage Return to supplies Wages Rent and rates Legal charges 10,000/- 1,700/- 7,000/- 1,000/- 11,000/- 500/- 800/- 1,000/- 4,000/- 600/- 400/- Packaging and printing Creditors Trade expenses Drawings Bills payable Debtors Repair & maintenance Reserve fund Sales Return from customers Carriage out 300/- 4,500/- 1,600/- 1,500/- 3,500/- 8,000/- 700/- 2,500/- 17,000/- 1,400/- 400/- Ans: Total 40900. Suspense A/c (Cr.) 2400. 12. Prepare a Trial Balance from the following information of Suresh & Co. as on 31st Ashad, 2075. Ledger heads (Rs.) Ledger heads (Rs.) Suresh’s capital Leasehold premises Due from customers Purchase returns Creditors Cash in hand Salaries & Wages Rent rates and taxes 1,556 741 530 264 528 142 598 465 Suresh’s drawing Sales Purchases Loan from bank Trading and office expenses Bills payable Opening stock Sales returns 564 2,756 1,268 250 784 100 264 98 Ans: Total: 5454
183 Trial Balance 13. From the following balances taken from the books of Bhabilal & Co. as on 31st Ashwin 075, prepare a trial balance. Heads of Account Amount (Rs.) Heads of Account Amount (Rs.) Cash Sundry debtors Salaries & Wages Capital Sales Freight Discount earned Furniture 10,000 21,600 2,700 50,000 48,500 4,000 450 2,500 Commission paid Purchases Carriage inward Sundry creditors Drawings Return outwards Bank Machinery 150 20,000 3,000 5,000 6,000 2,000 9,000 27,000 Ans: Total: Rs.105,950 14. Prepare a trial balance of Nepal Store for the fiscal year 2074/075 based on the following particulars. Description Amount (Rs.) Description Amount (Rs.) Capital Purchase Sales Goodwill 2,13,000 75,000 1,25,000 45,000 Salary Discount received Stationery Machine 25,000 2,000 5,000 1,90,000 Ans: Total: 3,40,000 15. Prepare the Trial Balance of Rabi Furniture Industry for the fiscal year 2074/075 from the following particulars. Particulars Amount (Rs.) Particulars Amount (Rs.) Purchase Sales Loan to Mohan Bank Overdraft 40,000 70,000 60,000 40,000 Suppliers Bills payable Land & Building Wages and Salary 35,000 15,000 45,000 15,000 Ans: Total Rs. 1,60,000 16. Prepare the Trial Balance of Himal Iron Industry for the fiscal year 2074/075 from the following particulars. Particulars Amount (Rs.) Particulars Amount (Rs.) Capital Loose tools Trade Mark Sales 50,000 65,000 35,000 60,000 Advance Wages Bills receivable Loan of Hari Creditors 25,000 30,000 20,000 25,000 Ans: Trial Balance Total: 1,55,000
184 Aakar’s Office Practice and Accountancy - 8 17. The following trial balance has been prepared by an inexperienced book keeper of ABC company for Chaitra, 2075. Redraft it in a correct form. Trial Balance As on .................... S.N. Particulars L.F. Dr. Balance (Rs,) Cr. Balance (Rs,) 1. Opening stock 400/- 2. Capital 3,500/- 3. Cash in hand 500/- 4. Cash at bank 4,000/- 5. Interest paid 300/- 6. Bills payable 1600/- 7. Wages 700/- 8. Purchase return 300/- 9. Sales return 200/- 10. Sales 12,150/- 11. Purchase 11800/- 12. Rent paid 100/- 13. Commission paid 50/- 14. Bills receivables 700/- 15. Furniture 500/- 16. Debtors and creditors 3,000/- 2000/- 17. Loan on debenture 1000/- 18. Vehicles 1,300/- Total 20,550/- 20,550/-