1. UNIT-4 Acct - 103

2. Asst. Prof, Deptt. of Accounting, CBAK
UNIT-4 (Acct – 103)
Syllabus
Trial Balance: Meaning, Importance and Preparation of Trial Balance.
Dr Masharique Ahmad
Asst. Prof, Deptt. of Accounting, CBAK

3. MEANING & PURPOSE TRIAL BALANCE ???
The trial balance is the statement of Ledger account balance within a ledger of a business at a particular instance.
>> Trial ??
Meaning = The act of testing something / Trying something to find about it
>> Balance??
Meaning = To lag or linger behind
Importance;
The Trial Balance is prepare to check the mathematical / Arithmetical accuracy of accounts. This is the only purpose of Trial Balance.

4. THE TRIAL BALANCE
The act of totaling debit balances and credit balances to confirm that total debits equal total credits.
The trial balance is a list of accounts and their balances at a given time.
The primary purpose of a trial balance is to prove debits = credits after posting.
If debits and credits do not agree, the trial balance can be used to uncover errors in journalizing and posting.

5. THE TRIAL BALANCE The Steps in preparing the Trial Balance are:
List the account titles and balances
Total the debit and credit columns
Prove the equality of the two columns
Key to preparing a trial balance is making sure that all the account balances are listed under the correct column.  The appropriate columns are as follows:
Assets = Debit balance Liabilities = Credit balance Expenses = Debit Balance Equity = Credit balance Revenue = Credit balance

6. A TRIAL BALANCE
The total debits must equal the total credits.

7. LIMITATIONS OF A TRIAL BALANCE
A trial balance does not prove all transactions have been recorded or the ledger is correct.
Numerous errors may exist even though the trial balance columns agree. For example, the trial balance may balance even when:
a transaction is not journalized
a correct journal entry is not posted
a journal entry is posted twice
incorrect accounts used in journalizing or posting
offsetting errors are made in recording

8. Practical Problems Problem:
Saif opened the Campus Laundromat on September 1, During the first month of operations the following occurred.
Sept Invested SR.20,000 cash in the business.
2 Paid SR.1,000 cash for store rent for September.
3 Purchased washers and dryers for SR.25,000, paying SR.10,000 in cash and signing SR.15,000, 6-month, % note payable.
4 Paid in cash of SR.1,200 for a one-year accident insurance policy in advance.
10 Received a bill from the Daily News for advertising the opening of the Laundromat SR.200.
20 Withdrew SR.700 cash for personal use.
Determined that cash receipts for laundry services for the month were SR.6,200.
Instructions
(a) Journalize the September transactions. (Use J1 for the journal page number.)
(b) Open ledger accounts and post the September transactions.
(c) Prepare a trial balance at September 30, 2008.

9. General Journal Date Ref. Debit Credit Account Titles and Explanation
2008
Sept. 1 2 3 4 10 20 30
Cash
Saif, Capital
(Owner’s investment of cash in business)
Rent Expense
(Paid September rent)
Laundry Equipment (washers and dryers )
Notes Payable
(Purchased laundry equipment for cash and 6-month, 12% note payable)
Prepaid Insurance
(Paid one-year insurance policy)
Advertising Expense
Accounts Payable
(Received bill from Daily News for advertising)
Bob Sample, Drawing
(Withdrew cash for personal use)
Service Revenue
(Received cash for services provided)
101
301
729
154
200
130
610
201
306
400
20,000
1,000
25,000
1,200
700
6,200
10,000
15,000

10. cash Prepaid Insurance Saif Capital Prepaid Insurance Saif Drawing
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 1 2 3 4 20 30
20,000
6,200
1,000
10,000
1,200
700
19,000
9,000
7,800
7,100
13,300
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 10 J1
200
Saif Capital
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 1 J1
20,000
Prepaid Insurance
Saif Drawing
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 4 J1
1,200
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 30 J1
700
Laundry Equipment
Service Revenue
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 30 J1
6,200
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 3 J1
25,000

11. Advertising Expenses Notes Payable Debit Credit Cash Prepaid Insurance
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 10 J1
200
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 3 J1
15,000
CAMPUS LAUNDROMAT
Trial Balance
September 30, 2008
Debit
Credit
Cash
Prepaid Insurance
Laundry Equipment
Notes Payable
Account Payable
Saif Capital
Saif Drawing
Service Revenue
Advertising Expenses
Rent Expenses
SR.13,300
1,200
25,000
700
200
1,000
SR.41,400
SR.15,000
20,000
6,200
Rent Expenses
Date
Explanation
Ref
Debit
Credit
Balance
2008
Sept. 2 J1
1,000

12. Problem:
From the following ledger balances of Pioneer Advertising Agency Prepare a Trial Balance as on October
Accounts Payable
Cash
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 5 J1
2,500
Date
Explanation Re f .
Debit
Credit
Balance
2008
Oct. 1 2 3 4 20 26 J1 J
10,000
1,200
900
600
500
4,000
11,200
10,300
9,700
9,200
5,200
15,200
Unearned Revenue
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 2 J1
1,200
Capital
Service Revenue
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 1 J1
10,000
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 31 J1
10,000
Drawing
Salaries Expenses
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 20 J1
500
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 26 J1
4,000

13. Rent Expense Advertising Supplies Prepaid Insurance Office Equipment
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 3 J1
900
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 5 J1
2,500
Prepaid Insurance
Office Equipment
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 4 J1
600
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 1 J1
5,000
Notes Payable
Date
Explanation
Ref.
Debit
Credit
Balance
2008
Oct. 1 J1
5,000

14. Pioneer Advertising Agency Trial Balance October 31,2009
Solution:
Pioneer Advertising Agency
Trial Balance
October 31,2009
Debit
Credit
Cash
SR.15,200
Advertising Supplies
2,500
Prepaid Insurance
600
Office Equipment
5,000
Notes Payable
SR 5,000
Accounts Payable
Unearned Revenue
1,200
C. R. Byrd, Capital
10,000
C. R. Byrd, Drawing
500
Service Revenue
Salaries Expense
4,000
Rent Expense
900
SR28,700
SR 28,700

15. At December 31, 2008, the unadjusted trial balance of Kari Thresher Company shows the following balances for selected accounts:
Supplies SR. 8,500
Prepaid Insurance 12,000
Equipment 40,000
Accumulated Depreciation 16,000
Unearned Fees 15,000
Notes Payable 50,000
Fees Earned 40,000
Instructions
Prepare the adjusting entries for the year ending December 31, 2008.

16. General Journal Date Account Title Debit Credit 2008
Dec. 31 Supplies Expense 5,500
Supplies 5,500
(SR.8,500 - SR.3,000)
31 Insurance Expense 6,000
Prepaid Insurance 6,000
(SR.12,000 x 6/12)
31 Depreciation Expense 8,000
Accumulated Depreciation 8,000
31 Unearned Fees 12,000
Fees Earned 12,000
31 Interest Expense 2,500
Interest Payable 2,500
(SR.50,000 x 10% x 6/12)
31 Accounts Receivable 3,500
Fees Earned 3,500
31 Salaries Expense 2,500
Salaries Payable 2,500
General Journal

17. Example Trial Balance: