Table of Contents
There are three methods for the preparation of trial balance. These methods are:
- Total or gross trial balance
- Balance or net trial balance
- Total – cum – balance trial balance
The method 1 and 2 are described below:
Total or Gross Trial Balance
Under this method, the two sides of all the ledger accounts are totalled up. Thereafter, a list of all the accounts is prepared on a separate sheet of paper with two “amount” columns on the right-hand side. The first one for debit amounts and the second one for credit amounts. The total of debit side and credit side of each account is then placed on “debit amount” column and “credit amount” column respectively of the list. Finally, the two columns are added separately to see whether they agree of not. This method is generally not followed in practice.
Balance or Net Trial Balance
Under this method, first of all the balances of all ledger accounts are drawn. Thereafter, the debit balances and credit balances are recorded in “debit amount” and “credit amount” column respectively and the two columns are added separately to see whether they agree or not. This is the most popular method and generally followed.
The various Steps involved in the preparation of Trial Balance under this method are given below:
- Find out the balance of each account in the ledger.
- Write up the name of the account in the first column.
- Record the account number in the second column.
- Record the debit balance of each account in debit column and credit balance in the credit column.
- Add up the debit and credit column and record the totals.
Example:
Enter the following transactions in journal and post them into the ledger and also prepare a trial balance.
| 2005 | |
| Jan. 1 | Mr. X started business with cash $80,000 and furniture $20,000. |
| Jan. 2 | Purchased goods on credit worth $30,000 from Y. |
| Jan. 3 | Sold goods for cash $16,000. |
| Jan. 4 | Sold goods on credit to S for $10,000 |
| Jan. 8 | Cash received from S $9,800 in full settlement of his account. |
Solution:
Journal
Date 2005 |
Particulars |
L.F |
DR. Amount ($) |
Cr. Amount ($) |
Jan. 1 |
Cash A/C |
5 |
80,000 |
|
Furniture A/C |
7 |
20,000 |
||
Capital A/C |
9 |
1,00,000 |
||
(Owner invested cash and furniture) |
||||
Jan. 2 |
Purchases Account |
11 |
30,000 |
|
Y |
13 |
30,000 |
||
(Bought goods on credit) |
||||
Jan. 3 |
Cash A/C |
5 |
16,000 |
|
Sales A/C |
15 |
16,000 |
||
(Sold goods for cash) |
||||
Jan. 4 |
S A/C |
17 |
10,000 |
|
Sales A/C |
15 |
10,000 |
||
(Sold goods on credit) |
||||
Jan. 8 |
Cash A/C |
5 |
9,800 |
|
Discount A/C |
19 |
200 |
||
S A/C |
17 |
10,000 |
||
(Cash received and discount allowed) |
Ledger
Cash Account (No.5)
| Date | references | J.R | Debit | Credit | Balance | |
| 2005 | Dr. | Cr. | ||||
| Jan. 1 | Capital A/C | 5 | 80,000 | 80,000 | ||
| Jan. 3 | Sales A/C | 5 | 16,000 | 96,000 | ||
| Jan. 8 | S A/C | 5 | 9,800 | 105,800 | ||
Furniture Account (No.7)
| Date | references | J.R | Debit | Credit | Balance | |
| 2005 | Dr. | Cr. | ||||
| Jan. 1 | Capital A/C | 5 | 20,000 | 20,000 | ||
Capital Account (No.9)
| Date | references | J.R | Debit | Credit | Balance | |
| 2005 | Dr. | Cr. | ||||
| Jan. 1 | Cash A/C | 5 | 80,000 | 80,000 | ||
| Jan. 1 | Furniture A/C | 5 | 20,000 | 1,00,000 | ||
Purchases Account (No.11)
| Date | references | J.R | Debit | Credit | Balance | |
| 2005 | Dr. | Cr. | ||||
| Jan. 2 | Y A/C | 5 | 30,000 | 30,000 | ||
Y Account (No.13)
| Date | references | J.R | Debit | Credit | Balance | |
| 2005 | Dr. | Cr. | ||||
| Jan. 2 | Purchases A/C | 5 | 30,000 | 30,000 | ||
Sales Account (No.15)
| Date | references | J.R | Debit | Credit | Balance | |
| 2005 | Dr. | Cr. | ||||
| Jan. 3 | Cash A/C | 5 | 16,000 | 16,000 | ||
| Jan. 4 | S A/C | 5 | 10,000 | 26,000 | ||
S Account (No.17)
| Date | references | J.R | Debit | Credit | Balance | |
| 2005 | Dr. | Cr. | ||||
| Jan. 4 | Sales A/C | 5 | 10,000 | 10,000 | ||
| Jan. 8 | Cash A/C | 5 | 9,800 | |||
| Jan. 8 | Discount A/C | 5 | 200 | Nil | ||
Discount Account (No.19)
| Date | references | J.R | Debit | Credit | Balance | |
| 2005 | Dr. | Cr. | ||||
| Jan. 8 | S A/C | 5 | 200 | 200 | ||
Trial Balance
S. No. |
Account Name |
A/C No. |
Debit |
Credit |
1 |
Cash Account |
5 |
105,800 |
|
2 |
Furniture Account |
7 |
20,000 |
|
3 |
Capital Account |
9 |
— |
100,000 |
4 |
Purchases Account |
11 |
30,000 |
|
5 |
Y Account |
13 |
— |
30,000 |
6 |
Sales Account |
15 |
— |
26,000 |
7 |
S Account |
17 |
— |
— |
8 |
Discount Account |
19 |
200 |
— |
Total |
156,000 |
1,56,000 |
Note: If an account shows zero balance, it is not necessary to record it in trial balance.