DPA10083 TRIAL BALANCE COMMERCE DEPARTMENT NORIANI BINTI SAMBRI MARDIYANA BINTI MARZUKI
DPA10183 BUSINESS ACCOUNTING
TRIAL BALANCE NORIANI BINTI SAMBRI MARDIYANA BINTI MARZUKI
DISCLAIMER Publisher @ Politeknik Sultan Abdul Halim Mu'adzam Shah All rights reserved: POLIMAS All rights reserved. No part of this publication may be reproduced, stored, transmitted in any form or by any electronic, mechanical, photocopying, recording or otherwise without prior permission of authors or publisher. The authors also do not guarantee that the content is suitable for the reader, but all the content is through the author's own experience and expertise. e ISBN: 978-967-0830-93-3 Publisher POLITEKNIK SULTAN ABDUL HALIM MU'ADZAM SHAH (POLIMAS) 06000 JITRA, KEDAH
PREFACE Business Accounting is revised from Fundamental of Accounting which cater for student’s semester one in Politeknik Sultan Abdul Halim Mu'adzam Shah. This e-book also suitable for students of other polytechnics and other institutions of higher learning who are pursuing professional courses in finance, business studies, accounting, business administration and commerce may also find this e-book useful. This e-book consists of chapter of Trial Balance. This chapter begins with learning objective focus on the important concepts and theories related to business accounting. The topic coverage in this edition adheres closely to the latest requirement of Malaysian Polytechnic Syllabus. Noriani Binti Sambri Mardiyana Binti Marzuki
ACKNOWLEDGEMENT We would like to acknowledge the assistance and encouragement of our friends and colleagues as well our family who have contributed and support us to the successful publication of this e-book. Special thanks to Puan Normiza Tajudin for her efforts to guide us until this e-book complete and publish. Noriani Binti Sambri Mardiyana Binti Marzuki
TABLE OF CONTENT 01 Learning Outcome 02 Trial Balance 03 Purpose of Trial Balance 04 Preparation of Trial Balance 05 Example & Solutions DPA10183 BUSINESS ACCOUNTING 06 Reference
BIODATA Noriani Binti Sambri Mardiyana Binti Marzuki B. In Accountancy (Hons) (UUM), M. Ed (Technical & Vocational) (UTHM) B. In Accountancy (Hons) (UUM)
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CHAPTER 5 TRIAL BALANCE
LEARNING OUTCOME: 5.1 Describe the purpose of preparing Trial Balance Prepare the Trial Balance Recognise types of errors that are revealed by Trial Balance a) Errors affecting the trial balance agreement b) Errors not affecting the trial balance agreement 05 5.3 5.2
5.1 TRIAL BALANCE SOURCE DOCUMENT BOOKS OF FIRST ENTRY LEDGER TRIAL BALANCE ADJUSTMENT ADJUSTED TRIAL BALANCE FINANCIAL STATEMENT Preparation of Trial Balance.. Check it out!!!
5.1 TRIAL BALANCE ⮚ Trial balance is a statement prepared based on account balances in the ledgers at the end of an accounting period. ⮚ All account with debit balances will be listed in the debit side, while accounts with credit balances will be listed in the credit side ⮚ The total debit amount must be equal to the total credit amount. If the amounts are not balanced or not equal, this means that errors or mistakes occurred.
5.1 PURPOSE OF TRIAL BALANCE To prepare financial statement Preparing of trial balance helps to detect errors within a given time period To verify the accuracy of postings from the book of original entry to ledger To verify the accuracy of double entries To check the accuracy of calculation
5.2 PREPARATION OF TRIAL BALANCE 2) Accounts having debit balances are listed in the debit column and accounts having credit balances are listed in the credit column 1) State the name of the business and the title 3) The amount in each of the column is then total Step in the preparation of a Trial Balance
5.2 PREPARATION OF TRIAL BALANCE TRANSFER OF ACCOUNT Account Debit balance: ⮚ Transfer to DR (left) of trial balance Account Credit balance: ⮚ Transfer to CR (right) of trial balance ⮚ Asset ⮚ Expenses ⮚ Drawing ⮚ Liability ⮚ Capital ⮚ Revenue
5.2 PREPARATION OF TRIAL BALANCE Asset / Expenses / Drawing Account Balance b/f 1,200 Transaction 200 Transaction 2,500 Transaction 1,500 Transaction 300 Balance c/f 200 3,700 3,700 Balance b/f 200 Liability / Capital / Revenue Account Transaction 3,700 Balance b/f 20,000 Transaction 200 Transaction 1,500 Balance c/f 18,200 Transaction 600 22,100 22,100 Balance b/f 18,200 COMPANY NAME TRIAL BALANCE AS AT XX/XX/XXXX PARTICULARS DEBIT (RM) CREDIT (RM) Assets/ Expenses / Drawing 200 Liability / Capital / Revenue 18,200 DR CR
COMPANY NAME TRIAL BALANCE AS AT XX/XX/XXXX PARTICULARS DEBIT (RM) CREDIT (RM) Assets xx Liabilities xx Capital xx Drawing xx Expenses xx Revenue xx Return Inwards xx Return Outwards xx 5.2 PREPARATION OF TRIAL BALANCE FORMAT OF TRIAL BALANCE
ARE YOU READY???
EXAMPLE 1 EXAMPLE Particular RM Bank RM10,000 Account payable RM28,000 Account receivable RM18,000 April 1 Sold goods on credit RM1,600 7 Paid creditors by cheque RM1,500 10 Paid utility bills by cheque RM300 11 Sold goods, received RM5,000 cash 12 Received RM800 cheque from debtor 20 Paid rent RM270 by cheque 27 Paid wages RM700 by cash 29 Owner took RM500 cash for his personal used The following are the transaction for Irdina Enterprise the month of April 2017. Opening balances are as follows:
EXAMPLE Bank Apr-01 Balance b/f 10,000 Apr-07 Payable 1,500 Apr-12 Receivable 800 Apr-10 Utility bill 300 Apr-20 Rent 270 Apr-30 Balance c/f 8,730 10,800 10,800 May-01 Balance b/f 8,730 Account Payable Apr-07 Bank 1,500 Apr-01 Balance b/f 28,000 Apr-30 Balance c/f 26,500 28,000 28,000 May-01 Balance b/f 26,500 Account Receivable Apr-01 Balance b/f 18,000 Apr-12 Bank 800 Apr-01 Sales 1,600 Apr-30 Balance c/f 18,800 19,600 19,600 May-01 Balance b/f 18,800 SOLUTIONS: DR CR DR
SOLUTIONS: Sales Apr-30 Balance c/f 6,600 Apr-01 Receivable 1,600 Apr-11 Cash 5,000 6,600 6,600 May-01 Balance b/f 6,600 Utility Bill Apr-10 Bank 300 Apr-30 Balance c/f 300 300 300 May-01 Balance b/f 300 Cash Apr-11 Sales 5,000 Apr-27 Wages 700 Apr-29 Drawing 500 Apr-30 Balance c/f 3,800 5,000 5,000 May-01 Balance b/f 3,800 DR DR CR
SOLUTIONS: Rent Apr-20 Bank 270 Apr-30 Balance c/f 270 270 270 May-01 Balance b/f 270 Wages Apr-27 Cash 700 Apr-30 Balance c/f 700 700 700 May-01 Balance b/f 700 Drawing Apr-29 Cash 500 Apr-30 Balance c/f 500 500 500 May-01 Balance b/f 500 Based on the ledgers above, you are required to prepare Trial Balance for Irdina Enterprise as at 30 April 2021. DR DR DR
SOLUTIONS: Irdina Enterprise Trial Balance As At 31 April 2021 Particulars Debit (RM) Credit (RM) Bank 8,730 Account Payable 26,500 Account Receivable 18,800 Sales 6,600 Utility Bill 300 Cash 3,800 Rent 270 Wages 700 Drawing 500 Total 33,100 33,100
Covida Trading prepared the following trial balance which contain number of errors. Prepare the correct trial balance as at 31/12/2021 Covida Trading Trial Balance As At 31/12/2021 Debit (RM) Credit (RM) Capital 39,468 Sales 237,942 Administrative expenses 7,100 Cash in hand 9,480 Salary 18,700 Cash at bank 13,562 Office equipment 16,000 Purchases 118,435 Commission received 8,320 Motor vehicle 21,453 Account receivable 17,400 Account payable 19,000 Discount allowed 7,000 Stock as at 1 January 2021 25,600 Land and building 50,000 325,562 283,898 EXAMPLE 2
SOLUTIONS: Covida Trading Trial Balance As At 31/12/2021 Debit (RM) Credit (RM) Capital 39,468 Sales 237,942 Administrative expenses 7,100 Cash in hand 9,480 Salary 18,700 Cash at bank 13,562 Office equipment 16,000 Purchases 118,435 Commission received 8,320 Motor vehicle 21,453 Account receivable 17,400 Account payable 19,000 Discount allowed 7,000 Stock as at 1 January 2021 25,600 Land and building 50,000 304,730 304,730
5.3 ERRORS IN THE TRIAL BALANCE ⮚ Even though the objective of a trial balance is to check the arithmetical accuracy of the double entry rules used, there might still be some errors in the trial balance. Types of errors Errors affecting the trial balance agreement Errors not affecting the trial balance agreement 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors affecting the trial balance agreement 1) Single Entry 2) Error of transposition 3) Error in addition 5) Error in the trial balance 4) Posting in the incorrect side of an account 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors affecting the trial balance agreement 1) Single Entry Cash Account Rental 200 ⮚ This error occurs when only one aspect of a transaction is recorded. ⮚ Example: RM200 paid for rental and paid by cash was crediting to the cash account but was not debited to the rental account. Rental Account No entry was recorded 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors affecting the trial balance agreement 2) Error of transposition ⮚ This error occurs when figures are written in the wrong order, that is debiting and crediting the accounts with different amounts. ⮚ Example: Cash sales of RM2,678 were debited to Cash Account as RM2,768 Sales Account Cash 2,678 Cash Account Sales 2,768 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors affecting the trial balance agreement 3) Error in addition ⮚ This error takes place when the debit and credit sides of an account are totaled. ⮚ It will lead to incorrect balancing figures. ⮚ Example: total Sales Account is RM2,200, but the figure in the Cash Account are added wrongly Sales Account Balance c/f 2,200 Cash 1,200 Cash 1,000 2,200 2,200 Cash Account Sales 1,200 Balance c/f 2,000 Sales 1,000 2,000 2,000 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors affecting the trial balance agreement 4) Posting in the incorrect side of an account ⮚ This error occurs when the debit or credit entry of a transaction is posted to the wrong side of an account. ⮚ Example: A sum of RM1,800 paid to accounts payable is debited to Accounts Payable and also debited to the Cash Account. Payable Account Cash 1,800 Balance b/f 1,800 Cash Account Accounts payable 1,800 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE 5) Error in the trial balance ⮚ This error occurs when transferring account balances from the ledgers to the trial balance. ⮚ Example: Total of the Sales Account and Cash Account are correct, that is RM5,500, the Cash Account has been wrongly transferred to the trial balance as RM550 Sales Account Balance c/f 5,500 Cash 4,200 Cash 1,300 5,500 5,500 Balance b/f 5,500 Cash Account Sales 4,200 Balance c/f 5,500 Sales 1,300 5,500 5,500 Balance b/f 5,500 TRIAL BALANCE AS AT …… Particulars Debit (RM) Credit (RM) Sales 5,500 Cash 550 Errors affecting the trial balance agreement 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors not affecting the trial balance agreement 1) Error of omission 2) Error of commission 3) Error of principle 5) Compensating errors 4) Complete reversal of entries 6) Error of original entry 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors not affecting the trial balance agreement 1) Error of omission ⮚ This error occurs when an entire transaction has not been recorded or a transaction is completely omitted from the books of accounts. Example: Jan 1 Cash sales RM150 Jan 2 Cash sales RM130 Sales Account Jan 1 sales 150 Jan 2 no entry was made Cash Account Jan 1 Cash 150 Jan 2 no entry was made 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Sales Account Jan 1 Ahmad 500 Jan 2 Amat 600 Jan 5 Amat 700 Errors not affecting the trial balance agreement 2) Error of commission ⮚ This is type of error that occurs when the correct amount is posted into a wrong account of the same category of accounts. Jan 1 Credit sales to Ahmad RM500 Jan 2 Credit sales to Amat RM600 Jan 5 Credit sales to Amat RM700 Receivable Ahmad Jan 1 Sales 500 Jan 2 Sales 600 Receivable Amat Jan 5 Sales 700 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors not affecting the trial balance agreement 3) Error of principle ⮚ This error occurs an amount is posted into an account of a different category. ⮚ Example: Repair cost of RM250 of delivery van were debited to delivery van account (asset) instead of delivery van repair account. Cash Account Jan 1 Delivery van 250 Delivery Van Jan 1 Cash 250 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors not affecting the trial balance agreement 4) Complete reversal of entries ⮚ This error arises when the amount and the accounts are correct but each item is shown on the wrong side of the account. ⮚ Example: Paid account payable RM600 cash Cash Account Account Payable 600 Account Payable Cash 600 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors not affecting the trial balance agreement 5) Compensating errors ⮚ An error on the debit side is compensated by an error of equal amount on the credit side. ⮚ The error cancels out each other. ⮚ It involves two or more errors Example: Credit sales of RM100 were wrongly credited to Sales account as RM1,000. A cash purchase of RM1,000 was wrongly credited to Account Payable RM100. Receivable Account Sales 100 Sales Account Receivable 1,000 Payable Account Purchases 100 Purchases Account Payable 1,000 5.3 ERRORS IN THE TRIAL BALANCE
ERRORS IN THE TRIAL BALANCE Errors not affecting the trial balance agreement 6) Error of original entry ⮚ This is where errors were made in the books of original entry (journals) ⮚ Example: Cash sales of RM65 recorded in the journal as RM56 and then posted to the ledger as RM56 Cash Account Sales 56 Sales Account Cash 56 5.3 ERRORS IN THE TRIAL BALANCE
Are you ready ???? SELF ASSESSMENT
Let’s start. . . . .
EXERCISE – TRIAL BALANCE OBJECTIVE & STRUCTURE QUESTION 1. Which of the following is not listed in the trial balance A. Commission B. Closing stock C. Rent Received D. Depreciation on the motor vehicle 2. Choose the correct account that will be placed in the credit column of the trial balance. A. Purchase B. Rent expense C. Furniture D. Sales 3. An account that normally has a credit balance is___________. A. Revenue, Asset, and owner equity B. Expense, capital and liabilities C. Expenses, asset and drawing D. Revenue, capital and liabilities 4. When the trial balance is not balanced it show that the account are_________. A. In errors or mistakes B. Not balanced or not equal C. Have no errors or no mistakes D. Balanced or equal
ANSWER OBJECTIVE QUESTION 3. An account that normally has a credit balance is___________. A. Revenue, Asset, and owner equity B. Expense, capital and liabilities C. Expenses, asset and drawing D. Revenue, capital and liabilities 4. When the trial balance is not balanced it show that the account are_________. A. In errors or mistakes B. Not balanced or not equal C. Have no errors or no mistakes D. Balanced or equal 1. Which of the following is not listed in the trial balance A. Commission B. Closing stock C. Rent Received D. Depreciation on the motor vehicle 2. Choose the correct account that will be placed in the credit column of the trial balance. A. Purchase B. Rent expense C. Furniture D. Sales
EXERCISE 1 – TRIAL BALANCE Indicate (√) in the correct column to show the normal balance for the following accounts. Types of account Dr Cr Types of account Dr Cr Capital (Example) √ Mortgage Bank (overdraft) Wages Account Payable Commission received Account Receivable Salaries Premises Interest received Machinery Rent expenses Vehicle Discount received Fixtures and fittings Taxi/bus/flight fares Furniture Discount allowed Loan to ABC Advertising expenses Loan from ABC Rates/utility expenses Fixed deposit Insurance expenses Drawings Stationery Purchases Returns Outwards Sales Returns Inwards General expenses Carriage inwards Investment Carriage outwards
ANSWER 1 Indicate (√) in the correct column to show the normal balance for the following accounts. Types of account Dr Cr Types of account Dr Cr Capital √ Mortgage √ Bank (overdraft) √ Wages √ Account Payable √ Commission received √ Account Receivable √ Salaries √ Premises √ Interest received √ Machinery √ Rent expenses √ Vehicle √ Discount received √ Fixtures and fittings √ Taxi/bus/flight fares √ Furniture √ Discount allowed √ Loan to ABC √ Advertising expenses √ Loan from ABC √ Rates/utility expenses √ Fixed deposit √ Insurance expenses √ Drawings √ Stationery √ Purchases √ Returns Outwards √ Sales √ Returns Inwards √ General expenses √ Carriage inwards √ Investment √ Carriage outwards √
EXERCISE 2 – TRIAL BALANCE Bank (overdraft) 3,750 Return outwards 432 Purchase 2,550 Account Payable 4,326 Cash 144 Equipment 8,112 Sales 2,190 Motor van 9,600 Return inwards 270 Account Receivable 3,522 Wages 4,500 Capital ? From the following list of balances, prepare a trial balance as at 31 January 2022 for Sajidah Coffee Corner. She has omitted to open a capital account
ANSWER 2 Coffee Corner Trial Balance As At 31/1/2022 DR (RM) CR (RM) Bank (overdraft) 3,750 Purchase 2,550 Cash 144 Sales 2,190 Return inwards 270 Wages 4,500 Return outwards 432 Account Payable 4,326 Equipment 8,112 Motor van 9,600 Account Receivable 3,522 Capital 18,000 TOTAL 28,698 28,698 Capital = Record in credit side Capital =TOTAL (DR) – TOTAL (CR) Capital = 28,698 – 10,698 Capital = RM18,000
EXERCISE 3 – TRIAL BALANCE Correct and balance the following Trial Balance Ilham Trading Trial Balance As At 31/12/2021 DR (RM) CR (RM) Capital 24,000 Drawings 8,400 General expenses 600 Sales 46,200 Purchases 34,800 Account Receivable 8,160 Account Payable 10,800 Bank 18,120 Cash 240 Machinery 1,800 Motor Vehicle 6,000 Rent 2,880
ANSWER 3 Correct and balance the following Trial Balance Ilham Trading Trial Balance As At 31/1/2022 DR (RM) CR (RM) Capital 24,000 Drawings 8,400 General expenses 600 Sales 46,200 Purchases 34,800 Account Receivable 8,160 Account Payable 10,800 Bank 18,120 Cash 240 Machinery 1,800 Motor Vehicle 6,000 Rent 2,880 TOTAL 81,000 81,000