1. Balancing Accounts and the Trial Balance Chapter 4

2. Balancing double entry accounts

3. Step 1: total both sides DR Furniture Account CR 1-May 1,50017-May 250 Bank a/cABC Ltd a/c 15-MayABC Ltd a/c2,250 debit side = 3,750 Credit side = 250

4. Step 2: get the balancing figure by finding the difference between the two totals Debit side 3,750 less credit side 250 = 3,500. This is the balancing figure The balance goes on the lower side, in this case the credit side

5. Step 3: enter the balance on the lower side DR Furniture Account CR 1-May 1,50017-May 250 Bank a/cABC Ltd a/c 15-MayABC Ltd a/c2,25030-MayBalance c/d3,500

6. Step 4: total both sides DR Furniture Account CR 1-May 1,50017-May 250 Bank a/cABC Ltd a/c 15-MayABC Ltd a/c2,25030-MayBalance c/d3,500 3,750

7. Step 5: bring the balance down below the total on opposite side DR Furniture Account CR 1-May 1,50017-May 250 Bank a/cABC Ltd a/c 15-MayABC Ltd a/c2,25030-MayBalance c/d3,500 3,750 1-JuneBalance b/d 3,500

8. The balanced account DR Furniture Account CR 1-May 1,50017-May 250 Bank a/cABC Ltd a/c 15-MayABC Ltd a/c2,25030-MayBalance c/d3,500 3,750 30-MayBalance b/d3,500

9. The Trial Balance

10. For each debit entry there is a credit entry For each credit entry there is a debit entry If all the items are recorded in all the accounts the total of the debit entries should equal the total of the credit entries. Total debit balances = Total credit balances

11. The Trial Balance A trial balance is a list of balances only, arranged according to whether they are debit balances or credit balances. Debit €Credit € Sales Sales returns Purchases Purchases returns Rent Rates Advertising Light and Heat Insurance Wages and salaries Motor vehicles Premises Furniture and equipment Debtors A. Dunne J. O'Donoghue P. O'Meara M. McDonald B. Gibson Bank Overdraft Creditors B. Winne L. Lamb C. Gardge Loans Capital 10,000 50,000 7,000 2,000 3,000 4,000 10,000 15,000 25,000 250,000 40,000 2,500 1,500 3,000 4,000 3,000 _______ 100,000 5,000 23,000 10,000 5,000 3,000 150,000 134,000 430,000

12. Balance the following accounts Capital Account Rent Account 25 JanBank a/c50,000 25 JanBank a/c3,000 Bank Account Creditors Account (Ace Interiors) 25 JanCapital a/c50,00025 JanRent a/c3,000 30 JanBank5,00025JanShop Fittings a/c12,000 26 JanEquipment a/c4,500 30 JanAce motors a/c5,000 Creditors Account (ABC Limited) Equipment Account 29 JanEquipment a/c3,500 26 JanBank a/c4,500 29 JanABC Ltd a/c3,500 Shop Fittings Account 25 JanAce Interiors a/c12,000

13. Balanced Accounts Capital Account Rent Payable Account 31Balance c/d50,00025Bank a/c50,000 25Bank a/c3,00031Balance c/d3,000 1/2Balance b/d50,000 1/2Balance b/d3,000 Bank Account Creditors Account (Ace Interiors) 25Capital a/c50,00025Rent a/c3,000 30Bank5,00025Shop fittings a/c12,000 26Equipment a/c4,500 30Ace a/c5,000 31Balance c/d7,000 31Balance c/d37,500 12,000 50,000 1Balance b/d7,000 1/2Balance b/d37,500 Creditors Account (ABC Limited) Equipment Account 31Balance c/d3,50029Equipment a/c3,500 26Bank a/c4,500 1Balance b/d3,500 29ABC Ltd a/c3,50031Balance c/d8000 8,000 8000 1/2Balance b/d8,000 Shop Fittings Account 25Ace a/c12,00031Balance c/d12,000 1/2Balance b/d12,000

14. The Trial Balance Trial Balance at 31st January Debit € Credit € Capital 50,000 Bank37,500 Equipment8,000 Shop Fittings Accounts12,000 Rent Account3,000 Creditors - Ace Interiors 7,000 Creditors - ABC Limited 3,500 60,500

15. The Trial Balance and Errors There are two types of errors: Errors which result in a trial balance that doesn’t balance Errors which don’t affect the trial balance agreement

16. Errors which result in a trial balance that doesn’t balance Addition errors Using one figure for the debit and a different figure for the credit entry (debit €360 and credit €36) Entering one side of the transaction only (only entering debit of €360 omitting the credit entry)

17. Errors which don’t affect the trial balance agreement Errors of omission (Both debit and credit entries ignored) Errors of commission (Correct amount in wrong personal account) Errors of principle (Correct amount in wrong class of account) Compensating errors (Two compensating errors canceling each other) Errors of original entry (Incorrect amount posted to correct side of both accounts) Complete reversal of entries (Correct amount to correct accounts but both entries on incorrect side)