Account 8

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22, Withdrawn from bank Rs. 10,000.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.
075-5-1 100,000/-
075-5-5 Cash A/c Dr. 100,000/- 70,000/-
075-5-8 15,000/-
075-5-11 To Capital A/c 25,000/-

075-5-15 (Being business commenced) 5,000/-
075-5-22 10,000/-
Bank A/c Dr. 70,000/-

To Cash A/c

(Being cash deposited into bank)

Furniture A/c Dr. 15,000/-

To Cash A/c

(Being furniture purchased)

Machinery A/c Dr. 25,000/-

To Bank A/c

(Being machinery purchased and paid by
cheque)

Stationery A/c Dr. 5,000/-

To Cash A/c

(Being stationery purchased)

Cash A/c Dr. 10,000/-

To Bank A/c

(Being withdrawn from bank for office use)

The Journal 151

075-5-28 Salary A/c Dr. 20.000/-

To Bank A/c 20.000/-

(Being salary paid through bank)

075-5-29 Cash A/c Dr. 5,000/-

To Commission received A/c 5,000/-

(Being commission received)

075-5-30 Rent A/c Dr. 18,000/-

To Cash A/c 18,000/-

(Being rent paid to the landlord)

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.

152 Aakar’s Office Practice and Accountancy - 8

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.

The Journal 153

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.

154 Aakar’s Office Practice and Accountancy - 8

Unit 13 The Ledger

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.

Dr. Cash A/c Cr.
Amount
Date Particulars J.F. Amount Date Particulars J.F. 70,000/-

074-5-1 To Capital A/c 100,000/- 074-5-5 By Bank A/c 15000/-
5000/-
074-5-22 To Bank A/c 10,000/- 074-5-8 By Furniture A/c 18,000/-
7000/-
074-5-29 To Commission A/c 5000/- 074-5-15 By Stationery A/c 115000/-

074-5-30 By Rent A/c

074-5-30 By Balance c/d

115000/-

074-6-1 To Balance b/d 7,000/-

The Ledger 155

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.

156 Aakar’s Office Practice and Accountancy - 8

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:

Type of Ledger Account

Personal 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.

The Ledger 157

4. Differences between Journal and Ledger

Journal Ledger

1. It is a primary record of financial 1. It is the secondary entry of financial
transactions. transactions.

2. It is prepared in chronological order or 2. It is recorded on ledger head wise basis.
date wise.

3. It helps to prepare ledger. 3. It helps to prepare trial balance.

4. Recording of transactions in journal is 4. Recording of transactions in ledger
called ‘Entry’. 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 7. It shows the balance of an account.
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.”

158 Aakar’s Office Practice and Accountancy - 8

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 12,50,000/- 12,50,000/-

To Capital A/c
(Being business commenced)

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/-

The Ledger 159

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/- By Salary A/c 10,000/-

By Hari’s A/c 10,000/-

20,000/- 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

160 Aakar’s Office Practice and Accountancy - 8

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 To Capital A/c 100,000/- 074-5-5 By Bank A/c 70,000/-

074-5-22 To Bank A/c 10,000/- 074-5-8 By Furniture A/c 15000/-

074-5-29 To Commission A/c 5000/- 074-5-15 By Stationery A/c 5000/-

074-5-30 By Rent A/c 18,000/-

074-5-30 By Balance c/d 7000/-

115000/- 115000/-

074-6-1 To Balance b/d 7,000/-

Dr. Capital A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
074-5-30 To Balance c/d
100,000/- 074-5-1 By Cash A/c 100,000/-

100,000/- 100,000/-

074-6-1 By Balance b/d 100,000/-

The Ledger 161

Dr. Bank A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-5-5 To Cash A/c 70,000/- 074-5-11 By Machinery A/c 25,000/-

074-5-22 By Cash A/c 10,000/-

074-5-28 By Salary A/c 20,000/-

074-5-30 By Balance c/d 15,000/-

70,000/- 70,000/-

074-6-1 Ta Balance b/d 15,000/-

Dr. Furniture A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-5-8 To Cash A/c 15,000/- 074-5-30 By Balance c/d 15,000/-

15,000/- 15,000/-

074-6-1 By Balance b/d 15,000/-

Dr. Machinery A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

074-5-11 To Bank A/c 25,000/- 074-5-30 By Balance b/d 25,000/-

25,000/- 25,000/-

074-6 -1 To Balance b/d 25,000/-

Dr. Stationery A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
074-5-15 To Cash A/c
5,000/- 074-5-30 By Balance c/d 5,000/-
074-6-1 By Balance b/d
5,000/- 5,000/-

5,000/-

Dr. Salary A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
074-5-28 To Cash A/c
20,000/- 074-5-30 By Balance c/d 20,000/-
074-6-1 By Balance b/d
20,000/- 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/- 074-5-29 By Cash A/c 5,000/-

5,000/- 5,000/-

074-6-1 By Balance b/d 5,000/-

162 Aakar’s Office Practice and Accountancy - 8

Dr. Rent A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
074-5-30 To Cash A/c
18,000/- 074-5-30 By Balance c/d 18,000/-
074-6-1 To Balance b/d
18,000/- 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

The Ledger 163

Solution

Dr. Cash A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

075-8-1 To Capital A/c 10,00,000/- 075-8-2 By Bank A/c 750,000/-

075-8-12 To Sales A/c 50,000/- 075-8-6 By Purchase A/c 25,000/-

075-8-19 To Commission A/c 7000/- 075-8-11 By Stationery A/c 5,000/-

075-8-20 To Bank loan A/c 60,000/- 075-8-16 By Bank A/c 40,000/-

075-8-23 To Bhim Gurung A/c 245,000/- 075-8-22 By Bank A/c 50,000/-

075-8-29 By Rent A/c 20,000/-

075-8-30 By Balance c/d 472,000/-

1362,000/- 1362,000/

075-9-1 To balance b/d 472000/-

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/- 075-8-1 By Cash A/c 10,00,000/-

10,00,000/- 10,00,000/-

075-9-1 By Balance b/d 10,00,000/-

Dr. Bank A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

075-8-2 To Cash A/c 750,000/- 075-8-5 By Machinery A/c 50,000/-

075-8-16 To Cash A/c 40,000/- 075-8-17 By Hari Babu’s A/c 150,000/-

075-8-22 To Cash A/c 50,000/- 075-8-25 By Wages A/c 40,000/-

075-8-25 By Salary A/c 30,000/-

075-8-30 By Balance c/d 570,000/-

840,000/- 840,000/-

075-9-1 To Balance b/d 570,000/-

Dr. Machinery A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
075-8-5 To Bank A/c
50,000/- 075-8-30 By Balance c/d 50,000/-
075-9-1 To Balance b/d
50,000/- 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/- 075-8-8 By Purchase A/c 150,000/-

150,000/- 150,000/-

164 Aakar’s Office Practice and Accountancy - 8

Dr. Purchase A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
075-8-6 To Cash A/c
075-8-8 To Hari Babu’s A/c 25,000/- 075-8-30 By Balance c/d 175,000/-

075-9-1 To Balance b/d 150,000/-

175 000/- 175 000/-

175 000/-

Dr. Stationery A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
075-8-11 To Cash A/c
5,000/- 075-8-30 By Balance c/d 5,000/-
075-9-1 To Balance b/d
5,000/- 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/- 075-8-12 By Cash A/c 50,000/-

075-8-14 By Bhim Gurung A/c 250,000/-

300,000/- 300,000/-

075-9-1 By Balance b/d 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/- 075-8-23 By Cash A/c 245,000/-

075-8-23 By Discount A/c 5,000/-

250,000/- 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/- 075-8-12 By cash A/c 7,000/-

7,000/-

7,000/- 075-9-1 By Balance b/d 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/- 075-8-20 By cash A/c 60,000/-

60,000/- 60,000/-

075-9-1 By Balance b/d 60,000/-

The Ledger 165

Dr. Discount A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

075-8-23 To Bhim Gurung A/c 5,000/- 075-8-30 By Balance b/d 5,000/-

5,000/- 5,000/-

075-9-1 To Balance b/d 5,000/-

Dr. Wages A/c Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

075-8-25 To Bank A/c 40,000/- 075-8-30 By Balance b/d 40,000/-

40,000/- 40,000/-

075-9-1 To Balance b/d 40,000/-

Dr. Salary A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
075-8-25 To Bank A/c
30,000/- 075-8-30 By Balance b/d 30,000/-
075-9-1 To Balance b/d
30,000/- 30,000/-

30,000/-

Dr. Rent A/c Cr.
Date Particulars J.F.
Amount Date Particulars J.F. Amount
075-8-29 To Cash A/c
20,000/- 075-8-30 By Balance b/d 20,000/-
075-9-1 To Balance b/d
20,000/- 20,000/-

20,000/-

Glossary : look from the beginning
: recording the transaction from journal to ledger
Scan : be more
Posting : mistakes
Exceed : date wise
Errors : summarize record of financial transaction of particular
Chronological
Ledger account
: excess of credit over debit amount
Credit balance : excess of debit over credit amount
Debit balance

166 Aakar’s Office Practice and Accountancy - 8

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.

The Ledger 167

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.

168 Aakar’s Office Practice and Accountancy - 8

Unit 14 Trial Balance

Learning Objectives After studying this unit, students will
be able to :

List of possible items shown in trial balance write the meaning of trial balance,
know the objectives and
S.N. Particulars L.F. Debit Credit Reasons
amount amount advantages of trial balance,
1 Opening stock Expenses know the rules of a trial balance,
2 Purchase ×××× Expenses write the considerations of a trial
3 Sales return Decrease in sales
4 Traveling expenses ×××× Expenses balance,
5 Cash Assets know the accounting errors in trial
6 Bank ×××× Assets
7 Commission expenses Expenses balance,
8 Bad debt ×××× Loss/Expenses prepare different trial balance.
9 Wages Expenses
10 Rent ×××× Expenses Trial Balance
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/ ×××× Expenses

electricity ××××
27 Printing, transportation & fuel
28 Capital ××××
29 Purchase return
30 Sales ××××
31 Interest received
32 Bank overdraft ××××
33 Commission received
34 Rent received ××××
35 Discount received
36 Creditor ××××
37 Loan and bills payable
38 Reserves ××××
39 Advance income
40 Carriage inward ××××
41 Cartage
42 Audit fees ××××
43 Legal charges
44 Sampling expenses ××××
45 Discount
46 Commission ××××
47 Export duty
48 Repair & maintains ××××
49 Charity donation
50 Bank charge ××××
51 Sales tax
52 Loss by incident ×××× ×××× Expenses
53 Drawings ×××× Capital
54 Goodwill ×××× ×××× Decrease in purchase
55 Accrued income ×××× ×××× Revenue
56 Income from investment ×××× ×××× Income
57 Dividend received ×××× ×××× Liabilities
58 Miscellaneous receipts ×××× ×××× Income
59 Outstanding expenses ×××× ×××× Income
×××× ×××× Income
Total ×××× ×××× Liabilities
×××× ×××× Liabilities
×××× ×××× Capital
×××× Liabilities
×××× ×××× Expenses
×××× ×××× Expenses
×××× ×××× Expenses
×××× ×××× Expenses
×××× ×××× Expenses
Expenses
×××× Expenses
Expenses
Expenses
Expenses
Expenses
Expenses
Loss
Decrease in capital
Assets
Assets
Income
Income
Income
Liabilities

169

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

170 Aakar’s Office Practice and Accountancy - 8

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.

Trial Balance 171

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.

172 Aakar’s Office Practice and Accountancy - 8

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.

Trial Balance 173

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 Credit Reasons
amount amount
1 Opening stock Expenses
2 Purchase ×××× Expenses

××××

174 Aakar’s Office Practice and Accountancy - 8

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/ ×××× Expenses

electricity ×××× Expenses
27 Printing, transportation & fuel Capital
28 Capital ×××× Decrease in
29 Purchase return ×××× purchase
Revenue
30 Sales ×××× Income
31 Interest received ×××× Liabilities
32 Bank overdraft ×××× Income
33 Commission received ×××× Income
34 Rent received ×××× Income
35 Discount received ××××
36 Creditor ×××× Liabilities
37 Loan and bills payable ×××× Liabilities
38 Reserves ×××× Capital

Trial Balance 175

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 10,000 Commission paid 150
Sundry debtors 21,600 Purchases
Salaries & wages 2,700 Carriage inward 20,000
Capital 50,000 Sundry creditors 3,000
Sales 48,500 Drawings 5,000
Freight 4,000 Return outwards 6,000
Discount earned 450 Bank 2,000
Furniture 2,500 Machinery 9,000
27,000

176 Aakar’s Office Practice and Accountancy - 8

Solution:

Trial Balance of Sanokaji & Co, as on 31st Ashwin, 075

S.No Particulars L.F. Dr. Balance Cr. Balance

1 Cash 10,000 -

2 Sundry debtors 21,600 -

3 Salaries & wages 2,700 -

4 Capital - 50,000

5 Sales - 48,500

6 Freight 4,000 -

7 Discount earned - 450

8 Furniture 2,500 -

9 Commission paid 150 -

10 Purchases 20,000 -

11 Carriage inward 3,000 -

12 Sundry creditors - 5,000

13 Drawings 6,000 -

14 Return outwards - 2,000

15 Bank 9,000 -

16 Machinery 27,000 -

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 60,000 Discount allowed 600
Business premises 35,000 Wages 17,000
Furniture & fixtures 13,500 Insurance & rates 1,200
Plant and machinery 46,000 Sundry creditors 22,000
Purchases 78,000 Sundry debtors 34,000
Sales 1,30,000 Drawings 3,000
Return inwards 1,500 Bills payable 4,000
Return outwards 2,000 Cash in hand 1,500
Carriage inward 1,400 Bank overdraft 15,300
Carriage outward 1,100
Commission received
500

Trial Balance 177

Solution:

Trial Balance of Bharatmani Bros, as on 31st Ashwin, 075

S.N. Particulars L.F. Dr. Balance Cr. Balance

1 Capital - 60,000
2 Business premises 35,000 -
3 Furniture & fixtures 13,500 -
4 Plant and machinery 46,000 -
5 Purchases 78,000 -
6 Sales
7 Return inwards - 1,30,000
8 Return outwards 1,500 -
9 Carriage inward
10 Carriage outward - 2,000
11 Commission received 1,400 -
12 Discount allowed 1,100 -
13 Wages
14 Insurance & rates - 500
15 Sundry creditors 600 -
16 Sundry debtors 17,000 -
17 Drawings 1,200 -
18 Bills payable
19 Cash in hand 34,000 22,000
20 Bank overdraft 3,000 -
-
-
1,500 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 13,000 Capital 60,000
Rent 7,000 Debtors 22,000
Opening stock 5,500 Creditors 20,000
Building 25,000 Bank overdraft 12,000
Loan 20,000 Sales 58,000
Purchases 35,000 Wages 13,000
Interest 3,000 Cash 5,000
Bills payable 10,500 Machinery 50,000
Sales return 5,000 Purchase returns 3,500
Tax and insurance 1,500 Dividend (Cr.) 1,000

178 Aakar’s Office Practice and Accountancy - 8

Solution:

Trial Balance of LNS Co. Pvt. Ltd, as on 31st Bhadra, 075

S.N. Particulars L.F. Dr. Balance (Rs.) Cr. Balance (Rs.)
Total
1 Bills receivables 13,000 -
2 Capital - 60,000
3 Rent
4 Debtors 7,000 -
5 Opening stock 22,000 -
6 Creditors 5,500 -
7 Building 20,000
8 Bank overdraft - -
9 Loan 25,000 12,000
10 Sales 20,000
11 Purchases - 58,000
12 Wages - -
13 Interest - -
14 Cash 35,000 -
15 Bills payable 13,000 -
16 Machinery 3,000 10,500
17 Sales returns 5,000 -
18 Purchase returns - -
19 Tax and insurance 50,000 3,500
20 Dividend (Cr.) 5,000 -
- 1,000
1,500
-

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 4,000 Purchase 10,000
Carriage 500 Insurance 600
Printing and stationery 400 Dividend received
Machinery 2,550
Furniture 13,000 Discount (Cr) 150
Rent and taxes 15,000 Land and building
Sales return 4,000 Creditors 20,000
Debtors 1,500 Salaries 7,000
Cash at bank 8,000 Cash in hand 7,000
Purchase returns 18,000 Sales 5,000
Bills payables 22,000
800 Bills receivables 4,500
4,000 Capital 75,000

Trial Balance 179

Solution:

Trial Balance of Dinesh Murti Co., as on 31st Sharawan, 075

S.N. Particulars L.F. Dr. Balance Cr. Balance
Total
1 Opening stock 4,000 -
2 Purchase 10,000 -
3 Carriage -
4 Insurance 500 -
5 Printing and stationery 600 -
6 Dividend received 400 2,550
7 Machinery -
8 Discount (Cr) - 150
9 Furniture 13,000 -
10 Land and building -
11 Rent and taxes - -
12 Creditors 15,000 7,000
13 Sales return 20,000 -
14 Salaries 4,000 -
15 Debtors -
16 Cash in hand - -
17 Cash at bank 1,500 -
18 Sales 7,000 22,000
19 Purchase returns 8,000 800
20 Bills receivables 5,000 -
21 Bills payables 18,000 4,000
22 Capital 75,000
-
- 1,11,500
4,500
-
-

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

180 Aakar’s Office Practice and Accountancy - 8

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 60,000 Drawing 2,500

Sundry creditors 30,800 Cash in hand 4,250

Sundry debtors 22,500 Plant and machinery 20,000

Land and building 26,000 Purchase 65,000

Opening stock 15,500 Carriage 1,100

Wages 25,000 Salary 9,000

Rent 4,000 Sales 1,21,000

Advertising 3,000 Printing and stationery 5,800

Office expenses 6,400 Discount (Cr.) 800

Commission (Dr.) 1,400 Bad debts 1,150

Ans: Total Rs. 2,12,600

Trial Balance 181

10. Prepare a trial balance from the following information of ABC Co., Jestha,
2075.

Particulars Rs. Particulars Rs.

Suresh’s capital 15,560/- Suresh’s drawing 5,640/-
Leasehold premises 7,410/- Customers 5,300/-
Purchase return 2,640/- Creditors 5,280/-
Cash in hand 1,420/- Salary and wages 5,980/-
Rent, rates and taxes 4,650/- Sales 27,560/-
Purchase 12,680/- Loan from bank 2,500/-
Trade expenses 7,840/- Bills payable 1,000/-
Opening stock 2,640/- Sales return 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 10,000/- Packaging and printing 300/-
Cash in hand 1,700/- Creditors 4,500/-
Cash at Bank 7,000/- Trade expenses 1,600/-
Stock (1-5-075) 1,000/- Drawings 1,500/-
Purchase 11,000/- Bills payable 3,500/-
Bad debt 500/- Debtors 8,000/-
Carriage 800/- Repair & maintenance 700/-
Return to supplies 1,000/- Reserve fund 2,500/-
Wages 4,000/- Sales 17,000/-
Rent and rates 600/- Return from customers 1,400/-
Legal charges 400/- Carriage out 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 1,556 Suresh’s drawing 564

Leasehold premises 741 Sales 2,756

Due from customers 530 Purchases 1,268

Purchase returns 264 Loan from bank 250

Creditors 528 Trading and office expenses 784

Cash in hand 142 Bills payable 100

Salaries & Wages 598 Opening stock 264

Rent rates and taxes 465 Sales returns 98

Ans: Total: 5454

182 Aakar’s Office Practice and Accountancy - 8

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 10,000 Commission paid 150
Sundry debtors 21,600 Purchases 20,000
Salaries & Wages 2,700 Carriage inward 3,000
Capital 50,000 Sundry creditors 5,000
Sales 48,500 Drawings 6,000
Freight 4,000 Return outwards 2,000
Discount earned 450 Bank 9,000
Furniture 2,500 Machinery 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 2,13,000 Salary 25,000
Purchase 75,000 Discount received 2,000
Sales 1,25,000 Stationery 5,000
Goodwill 45,000 Machine 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 40,000 Suppliers 35,000
Sales 70,000 Bills payable 15,000
Loan to Mohan 60,000 Land & Building 45,000
Bank Overdraft 40,000 Wages and Salary 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 50,000 Advance Wages 25,000
Loose tools 65,000 Bills receivable 30,000
Trade Mark 35,000 Loan of Hari 20,000
Sales 60,000 Creditors 25,000

Ans: Trial Balance Total: 1,55,000

Trial Balance 183

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/- 3,500/-
2. Capital 4,000/-
3. Cash in hand 500/-
4. Cash at bank 300/-
5. Interest paid 300/- 200/-
6. Bills payable 1600/- 11800/-
7. Wages 700/- 50/-
8. Purchase return 700/-
9. Sales return 12,150/- 2000/-
10. Sales 1000/-
11. Purchase 100/- 20,550/-
12. Rent paid
13. Commission paid 500/-
14. Bills receivables 3,000/-
15. Furniture
16. Debtors and creditors 1,300/-
17. Loan on debenture Total 20,550/-
18. Vehicles

184 Aakar’s Office Practice and Accountancy - 8