Rules And Examples Of Trial Balance

SHARE

Tally Solutions | Nov-21-2019

A trial balance is a conglomerate of or list of debit and credit balances extracted from various accounts in the ledger including cash and bank balances from cash book. The rule to prepare trial balance is that the total of the debit balances and credit balances extracted from the ledger must tally. Because every transaction has a dual effect with each debit having a corresponding credit and vice versa.

Therefore, at the end of the accounting period or at the end of each month, the balances of the ledger accounts are extracted, and trial balance is prepared to test as to if the total debits are equal to total credits or not.

Rules to prepare the Trial balance

The rule to prepare the Trial balance is an equation which is as follows:

Total Debit Entries = Total Credit Entries
Debit Credit
  • All Assets ( Cash in hand, Cash at Bank, Inventory, Land and Building, Plant and Machinery etc., )
  • Sundry Debtors
  • Expenses ( Carriage Inward, Freight, Rents, rebates and rates, Salary, Commission etc., )
  • Purchases
  • Losses ( Depreciation, Return inwards, Profit and loss A/c (Dr.), Bad debts etc., )
  • All liabilities ( Bank Overdraft, Secured and unsecured loans, bills payable, Outstanding Payables or expenses, Loan on mortgage etc ., )
  • Sundry Creditors
  • Reserve fund, general reserve, provision for depreciation, Accumulated depreciation etc.,
  • Sales

Gains ( Discount received, Return Outwards, Bad debts recovered, Profit and loss A/c (Cr) etc., )

Steps to prepare Trial balance

The following are the steps to prepare Trial Balance.

Step 1 Cast/ Balance all the ledger accounts in the books.
Step 2 List all the Debit balances on the debit side and sum them up.
Step 3 List all the Credit balances on the credit side and sum them up.
Ideally, the Trial Balance should Tally at Step 3.

Specimen of Trial balance

Trial Balance of XXX Ltd as at ______
SI No Particulars L.F Amount Rp DR Amount Rp CR
         

Example of Trial Balance

____ Ltd Trial Balance 31- Dec 2018 (in Dirham)
Accounts Debit Credit
Cash 1,02,280 -
Accounts Receivable 7,500 -
Office Expenses 2,500 -
Prepaid Rent 600 -
Prepaid Insurance 120 -
Office furniture and equipment 15,000 -
Bank loan - 15,000
Accounts Payable - 5,000
Unearned Revenues - 7,500
Capital - 1,00,000
Drawings 3,000 -
Commission Revenue - 12,500
Salary Expenses 9,000 -
Total 1,40,000 1,40,000
Obsessed With Delight
Inspired by the way you work, Tally is designed to delight you. Try out the all new
Tally.ERP 9 Release 6.6