GENERAL LEDGER AND TRIAL BALANCE

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General Ledger & Trial Balance
INRODUCTION TO TRIAL BALANCE:

A businessman closes and balances the ledger accounts at the end of the month or year to prepare the trial balance.
Normally, he prepares the trial balance at the end of the year for preparation of final accounts. The ledger accounts
having debit balances are recorded in the debit column of trial balance and accounts having credit balances are
recorded in the credit column of the trial balance. Both the columns of Trial balance should be equal, but if they are
not equal, efforts are made to locate the errors in the books of accounts. Later on when trial balance agrees, final
accounts are prepared.

MEANING OF TRIAL BALANCE:

Trial balance is statement of balance of various ledger accounts prepared as on particular day/date. It is a list
containing balances of ledger accounts. It is prepared periodically i.e. at the end of a month or year. Normally it is
prepared at the end of the month.

OBJECTIVES OF PREPARING THE TRIAL BALANCE:

A Trader prepares the trail balance for the following purposes:
(1) It checks the arithmetical accuracy of books of accounts.
(2) It assists in locating errors.
(3) It helps in preparation final accounts.

TYPES OF TRIAL BALANCE:

There are two types of Trial Balance as given below:

(1) Gross Trial Balance / Total Method: It is a trial balance in which the debit and credit totals of an account
are recorded in the trail balance i.e. the accounts are not balanced but only totaled on debit and credit sides.
For e.g. Machinery A/c debit total is Rs.30000 and credit total is Rs.5000 both are recorded. In the trial
balance under debit and credit columns respectively.
GENERAL LEDGER AND TRIAL BALANCE

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(2) Net Trial Balance / Balance Method: It is a Trial Balance in which the debit or credit balances of an
account are recorded in the trial balance i.e. the accounts are balanced and their balances. Either debit or
credit is recorded. For e.g. machinery A/c debit side total is Rs. 30,000 and credit side total is Rs. 5,000 It
shows a debit balance of Rs. 25,000 which is recorded in the debit column of the trial balance. If ant
particular account has no balance, then it will not be shown in the trial balance.

SPECIMEN / FORMAT OF TRIAL BALANCE:

There are two forms in which the trial balance is prepared.

(1) Journal Form: In this form the names of accounts are written serially in the particular column. The
debit balances are written in the debit column and credit balances are written in the credit column.

Specimen of a Journal Form:
Trial Balance of M/s as on ..


Sr. No.

Particulars/ Names of account

L.F.
Debit
(Rs.)
Credit
(Rs.)



Total

*** ***


(2) Ledger Form: In this form, the trial balance is prepared in the form of ledger account having two sides
i.e. debit side and credit side. The debit balances along with the respective names of accounts are
entered on the debit side, whereas credit balances along with the respective names of accounts are
entered on the credit side.

Specimen of a Ledger Form:
Trial Balance of M/s as on ..
GENERAL LEDGER AND TRIAL BALANCE

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Sr.
No.
Particular/Name of A/c L.F. Debit
(Rs.)
Sr. No. Particular/Name of A/c L.F. Credit
(Rs.)


Total


Total

*** ***


Guidelines for preparing the trial balance:

The following guidelines are useful for preparing trial balance:

(1)Accounts of expenses and losses shows debit balances. E.g. Salaries A/c, Loss by fire A/c Etc.

(2)Accounts of incomes and gains shows credit balances. E.g. Commission received A/c, Profit on sale of furniture
A/c etc.

(3) Accounts of properties and assets show debit balances. E.g. Building A/c, Goodwill A/c etc.

(4) Accounts of persons from whom the amount is receivable show debit balances. e.g. Debtors A/c, Drawing A/c,
Bank A/c etc.

(5) Accounts of persons from whom the amount is payable shows credit balances. e.g. Debtors A/c, Drawing A/c,
Bank A/c etc.

GENERAL LEDGER AND TRIAL BALANCE

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LIST OF ACCOUNTS HAVING DEBIT AND CREDIT BALANCES:

(A) Accounts having debit balances: the following accounts show debit balances.
Name of Account Name of Account
Purchases
Return Inward/Sales Return
Printing and Stationery
Telephone charges
Electricity Charges
Factory Rent
Rent/Office Rent
Royalties/Royalties on production
Freight/Freight inward/Freight on Purchases
Freight Outward/Freight on sales
Rent, Rates and Taxes
Power And Fuel
Commission
Discount/Discount Allowed/Discount on
Sales/Discount Given to Customers
Unproductive Wages
Refreshment Expense
Loading Charges
Unloading Charges
Clearing Charges
Forwarding Charges
Gas And Electricity
Entertainment Expenses
Import duty
Export duty
Custom duty
Stock of Goods / Inventories(opening)
Wages
Salaries
Postage And Telegram
Insurance/Insurance premium
Interest/Interest on Loan
Interest on Capital
Advertisement/Publicity
Bank Charges
Audit fees
Accounting Charges
Provident fund contribution
Legal Fees
Repairs And Renewals
Motor upkeep
Donations/Charity
Traveling Expenses
Conveyance
Heating And Lighting
Establishment Expenses
Bad Debts
Loss By fire
Loss by theft
Loss on sale of fixed assets
Loss on sale investments
Exciseduty
Octroi duty
Depreciation
GENERAL LEDGER AND TRIAL BALANCE

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Cash in Hand
Land and Building
Loose tools
Motor Car/Motor Vehicle
Delivery Van
Live stock
Freehold properties
Leasehold properties
Petty cash
Copy Right
Debtors/Customers/Book Debt
Investments
Drawings
Bank/Due Form bank/Owed by bank
Bills Receivable/Acceptances received
Provident Fund Investments
Loans Given/ Loans To..
Advances to supplier
Deposit with supplier
General Expenses/Trade Expenses


Packing charges
Stock of Stationery (opening)
Furniture and Fixtures
Plant and Machinery
Premises
Computer
Typewriter
Office equipments
Patent rights
Goodwill
Trade mark
Shares
Debentures
Government Securities
Prepaid expenses
Incomes Receivable
Reserve for Discount on creditors
Insurance company/claim
Fixed Deposits
Advance to office staff
Deposit with electric board
Unexpired insurance
(Note: Closing stock of Goods/stationery never appears in the trial balance.)

(B) Accounts having credit balance: The following accounts show credit Balances.
Name of accounts Name of accounts
Sales
Purchase Return/Return outward
Commission received
Interest on drawings
Interest on Investment
Capital
Bills payable/Acceptance given
Creditors/Suppliers
Outstanding expenses
Bank overdraft/Due to bank/Owed to bank
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Interest received
Bad debts recovery
Interest on Provident fund investment
Discount received/Discount allowed by
Suppliers/Discount on Purchases
Rent received
Sub-let rent
Sundry Income/Miscellaneous Income
Dividend received
Loan/Loan from/Loan taken
Income received in advance
Provident fund
General Reserve/Reserve Fund
Reserve for discount on debtors
Reserve for bad debts
Advances from customers
Goods lost by fire
Profit on sale of fixed asset
Profit on sale of investments.

MCQS of Trial Balance

1. From where are the amounts of trial balance recorded?
a) Ledger
b) Journal
c) Cash Book
d) Purchase Book


2. The debit side of trial balances shows which type of accounts?
a) Persons
b) Properties
c) Income & gain
d) Expenses & losses

3. The credit side of trial balances shows which type of accounts?
a) Persons
b) Properties
c) Income & gain
d) Expenses & losses
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4. Mrs. Mala A/c is
a.)Real A/c
b) Nominal A/c
c) Personal A/c
d) None of above

5. The expense which remains unpaid is known as
a) Prepaid income
b) Outstanding income
c) Outstanding expenses
d) Prepaid expenses

6. Income which is due but not yet received
a) Accrued Income
b) Prepaid Income
c) Prepaid Expenses
d) Accrued Expenses

7. Rent received is
a) Personal A/c
b) Real A/c
c) Nominal A/c
d) None of above


8. Expenses which are paid before they are due for payment
a) Prepaid income
b) Prepaid expenses
c) Outstanding income
d) Prepaid income

GENERAL LEDGER AND TRIAL BALANCE

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List of Common Journal Entries

1. Cash Sales

Cash a/c Dr
To Sales a/c

2. Credit Sales

Account Receivable a/c Dr
To Sales

3. Cash Purchase

Purchase a/c Dr
To Cash a/c

4. Credit Purchase

Purchase a/c Dr
To Account payable a/c

5. Expense paid in cash

Expense a/c Dr
To Cash

6. Expense not paid for

Expense a/c Dr
To Expense outstanding a/c

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7. Prepaid expense

Prepaid Expense a/c Dr
To cash

8. Income received in cash

Cash a/c Dr
To Income

9. Income earned but not yet received

Income receivable a/c Dr
To Income

10. Income not yet earned but collected in advance

Cash a/c Dr
To Pre received Income
For example, newspapers collect subscription for the whole year; Tata sky collects subscription for the
whole year.

Exercise 2

Prepare journal entries and prepare an income statement of the following transactions:
Om Enterprises is a consulting firm and the following represent their transactions in March 2014.
01-Mar-2014 Rent paid 20,000/-
03-Mar-2014 Service Revenue billed 42,000/-
05-Mar-2014 Collection from customers-
cheque received
21,000/-
07-Mar-2014 Electricity Bill paid 4,500/-
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(Rs.2,500/- relating to Feb
2014)
09-Mar-2014 Salary paid 12,000/-
14-Mar-2014 Service Revenue billed 37,000/-
16-Mar-2014 Received from customers 12,000/-
18-Mar-2014 Office stationery purchased
and paid for
2,500/-
21-Mar-2014 Insurance premium paid 6,500/-
23-Mar-2014 AMC charges due and not paid 7,500/-