2. BALANCING ACCOUNTS The Trial Balance Mr. BarryA-level Accounting Year 12

3. The Trial Balance Topic Objectives : To understand: The nature and importance of the trial balance. The reasons for producing a trial balance How to prepare a trail balance Mr. BarryA-level Accounting Year 12

4. What is the Trial Balance? The Trial Balance consists of 2 columns of figures listed under headings debits and credits. The figures are balances extracted from the business’s ledger accounts. Mr. BarryA-level Accounting Year 12

5. The Trial Balance Book keeper extracts a trial balance from accounting records to check the arithmetical accuracy of the business’ double-entry book-keeping The debit entries must equal the credit entries, seen when you study and apply the rules of double entry bookkeeping. If we follow this rule, then the TOTAL OF ALL DEBIT ENTRIES MUST EQUAL THE SUM OF ALL CREDIT ENTRIES A trial balance is a summary list of all the balances of every account distinguishing between the accounts with debit and credit balances Trial balances are usually extracted & written up at the end of every month Mr. BarryA-level Accounting Year 12

6. What column do certain account balances go into? – DEBIT » Expenses » Assets » Drawings – CREDIT » Liabilities » Income » Capital » What about bank account? If overdrawn – credit column as a liability If in credit – debit column as an asset Mr. BarryA-level Accounting Year 12

7. TRIAL BALANCE – worked example A balancing figure is the amount that needs to be included in the debit side or credit side of an account to make the debit side equal to the credit side. Dran account Cr 23 45 The debit side amounts to £80 41 The credit side adds to £45 16 To make the account balance we need to insert £35 into the credit side Account looks like this: Dran account Cr 23 45 The account balances. Looks like debit 41 35 entries were exactly the same amounts 16___ as the credit entries – NOT TRUE 80 80 We CARRY the balance down 35 We start anew balance c/d of £35 Mr. BarryA-level Accounting Year 12

8. Balancing the Accounts Answer When a balance is described as a debit balance or a credit balance, we are describing the balance required to start the account up again; the balance that has been brought down Zog’s account has a credit balance of £66 Melvyn’s account has a debit balance of £39 Speedie’s account has a debit balance of £61 Dr ZOG Cr 23 53 13 41 66 8 102 102 66 Dr Melvyn Cr 12 34 13 37 73 39 110 110 39 Dr Speedie Cr 71 90 27 38 91 61 189 189 61 Mr. BarryA-level Accounting Year 12

9. Worked Example The following transactions are for Gary’s business: 1.Gary purchased goods for resale £153 from Dora on credit 2.He sold goods £29 to Chris on credit 3.Gary sold goods for cash £296 4.He paid motor expenses £68, paying cash Required: Enter the transactions in Gary’s ledger, carry down any balances and check the entries by extracting a trial balance Mr. BarryA-level Accounting Year 12

10. In Pairs 3 minutes End Mr. Barry

11. Answer Dr Purchases account CrDr Dora Cr 153 Dr Sales account CrDr Chris Cr 29 29 296 Dr Cash account CrDr Motor expenses acc Cr 296 68 68 Trial Balance £ Purchases153 The ledger shows a Dr Bal, the TB shows a Dr Balance Dora153 The ledger shows a Cr Bal, the TB shows a Cr Balance Sales325 Sales have Cr entries = £325, the TB shows this Balance Chris 29 Cash228 The Dr side is ‘heavier’, the TB shows a Dr Balance Motor Expenses 68___ 478478 Shows TB is accurate as the TB balances Mr. BarryA-level Accounting Year 12

12. Worked Example 2 Dr Cash account CrDr Bank account Cr 42100 365 534 534458 912 141 12 69 Dr Rent account CrDr Wages account Cr 100 458 Dr Sales account CrDr Purchases account Cr 42 141 365 69 912 12 Required Balance the accounts; carry down any balances and extract a trial balance to check the accuracy of the ledger accounts Mr. BarryA-level Accounting Year 12

13. Worked Example 2 - answer Dr Cash account CrDr Bank account Cr 42100 365 534 534458 912 141 12 69 ___ 6 533 576576 1277 6 Dr Rent account CrDr Wages account Cr 100 458 Dr Sales account CrDr Purchases account Cr 42 141 365 69 1319912 12 222 1319 1319 222 222 1319 222 Mr. BarryA-level Accounting Year 12

14. Trial Balance Dr Cr ££ Cash 6 Bank 533 Rent 100 Wages 458 Sales 1,319 Purchases 222 _____ 1,319 1,319 Mr. BarryA-level Accounting Year 12