TRIAL BALANCE  DEFINITION  IT IS A STATEMENT SHOWING CREDIT AND DEBIT BALANCES FROM THE LEDGER.  HELPS ARITHMETICAL ACCURACY AND FACILITATES FINAL ACCOUNTS.

TRIAL BALANCE  BASIC PRINCIPLE :  SINCE IT IS DOUBLE ENTRY BOOK-KEEPING, HENCE, ASSETS AND EXPENSES ARE DEBIT BALANCES LIABILITIES AND INCOMES ARE CREDIT BALANCES. IN CASE OF ARITHMETICAL INACCURACY IDENTIFY CLERICAL/PRINCIPLE ERRORS AND RECTIFY

TRIAL BALANCE  TYPES OF ERRORS:  A) CLERICAL ERRORS  -- ERRORS OF OMISSION --- OMISSION OF TRANSACTION FROM BOOKS --- COMPLETE OMISSION NOT AFFECTING TRIAL BALANCE --- PARTIAL OMISSION AFFECTING TRIAL BALANCE

TRIAL BALANCE  -- ERRORS OF COMMISSION --- FIGURE POSTED ON THE WRONG SIDE OR WITH WRONG AMOUNT -- COMPENSATING ERRORS --- ONE ERROR BALANCES ANOTHER ERROR. B) ERRORS OF PRINCIPLE -- ERRORS IN CONTRAVENTION OF ACCOUNTING PRINCIPLES

TRIAL BALANCE  RECTIFICATION OF ERRORS IS A SERIES OF STEPS:  PASS THE CORRECT ENTRY  COMPARE THE WRONG ENTRY WITH THE CORRECT ONE  PASS THE RECTIFICATION ENTRY  IF TRIAL BALANCE DOES NOT TALLY THEN DIFFERENCE IS TRANSFERRED TO SUSPENCE ACCOUNT

TRIAL BALANCE TYPICAL TRIAL BALANCE N A M E DEBIT CREDIT  CAPITAL X  DRAWINGS X  PURCHASES X  SALES X  EXPENSES X  DEBTORS(CUSTOMRES) X  CREDITORS(SUPPLIERS) X  CASH X  SALES RETURN X

TRIAL BALANCE  TYPICAL ERRORS:  -- CLERICAL:  A) SALARY PAID 1000/- BUT POSTED AS 10, 000/-.  RECTIFICATION: CREDIT SALARY WITH 9000/-.  B) SALARY PAID 1000/- BUT POSTED IN RENT A/C.  RECTIFICATION: DEBIT SALARY AND CREDIT RENT WITH 1000/-.  C) GOODS WORTH 100/- SOLD TO VIJAY WRONGLY RECORDED IN PURCHASE REGISTER.  RECTIFICATION: CREDIT SALES AND PURCHASE A/Cs WITH 100/- EACH AND DEBIT VIJAY WITH 200/-.

TRIAL BALANCE AFTER TRIAL BALANCE IS PREPARED ONE FINDS. D) SALES OF 500/- POSTED AS 5000/- WHILE RENT PAID 500/- POSTED AS 5000/-.. RECTIFICATION: DEBIT SALES WITH 4500/-, CREDIT SUSPENCE WITH 4500/-, CREDIT RENT WITH 4500/-, DEBIT SUSPENCE WITH 4500/-.  E) SALARY PAID AS 1000/- BUT POSTED AS 10,000/- IN RENT A/C.  RECTIFICATION: DEBIT SALARY WITH 1000/- SUSPENCE WITH 9000/-; CREDIT RENT WITH 10000/-  F) A PURCHASER’S DEBIT BALANCE OF 9000/- HAS NOT BEEN TAKEN.  RECTIFICATION: DEBIT DEBTORS, CREDIT SUSPENCE TO THE EXTENT OF 9000/-.

CAPITAL AND REVENUE EXPENDITURE BASIC PRINCIPLE:. ALL EXPENSES AND RECEIPTS OF REVENUE NATURE ARE TAKEN TO TRADING AND PROFIT & LOSS ACCOUNT. ALL EXPENDITURES AND RECEIPTS OF CAPITAL NATURE ARE TAKEN TO BALANCE SHEET

CAPITAL AND REVENUE EXPENDITURE REVENUE RECEIPTS/PAYMENTS :. ARE SMALLER IN SIZE(RELATIVELY). ARE RECURRING IN NATURE. THE BENEFITS ARE OVER A SHORTER PERIOD (1 YEAR). THE PURPOSE IS TO RUN THE BUSINESS ON A DAY TO DAY BASIS. MAINTAIN ASSETS IN WORKING CONDITION

CAPITAL & REVENUE EXPENDITURE  CAPITAL RECEIPTS/PAYMENTS:  ARE USUALLY LARGE(RELATIVELY)  ARE NON-RECURRING IN NATURE  THE BENEFITS ARE OVER LONGER DURATION  THE PURPOSE IS TO ENHANCE PRODUCTIVITY OF THE ASSETS

CAPITAL AND REVENUE EXPENDITURE  THERE ARE CERTAIN EXPENDITURES WHICH ARE OTHERWISE REVENUE IN NATURE BUT SOMETIMES UNUSUALLY LARGE AND WHOSE BENEFIT TO THE ORGANISATION MAY ACCRUE AFTER FEW YEARS.THESE MAY BE TREATED AS DEFERRED REVENUE EXPENDITURE, CARRIED TO THE BALANCE SHEET, AND WRITTEN OFF TO THE PROFIT & LOSS ACCOUNT OVER A PERIOD OF TIME.

CAPITAL AND REVENUE EXPENDITURE SAME IS THE CASE WITH CERTAIN RECEIPTS SUCH AS SALE OF ASSETS, WHERE THE RECEIPTS UPTO BOOK VALUE IS DEDUCTED FROM THE ASSET, AND, IF BETWEEN BOOK VALUE & COST AS REVENUE RECEIPT & ABOVE COST AS CAPITAL RECEIPT.. THERE IS A THIN LINE BETWEEN CAPITAL & REVENUE CLASSIFICATION. FOR INSTANCE REPAIRS TO MACHINERY WHICH KEEPS THE ASSET IN WORKING CONDITION IS CHARGED TO THE P & L A/C WHILE BETTERMENT EXPENSE IS CAPITALISED.

CAPITAL & REVENUE EXPENDITURE  EXAMPLES OF EACH TYPE OF CLASSIFICATION:  CAPITAL NATURE: -- PURCHASE OF ASSETS SUCH AS BUILDING, MACHINERY, VEHICLES. -- EXPENDITURE IN PURCHASE /SETTING UP OF CAPITAL GOODS/ASSETS -- EXCESS OF SALE PRICE OF ASSET OVER ITS COST PRICE -- FUNDS RAISED THRU BANKS/INSTITUTIONS -- FUNDS RAISED THRU ISSUE OF SHARES, & DEBENTURES

CAPITAL AND REVENUE EXPENDITURE  REVENUE NATURE:  ALL TRANSACTIONS RELATING TO NOMINAL ACCOUNTS  EVEN CERTAIN EXPENSES OF NON-RECURRING NATURE BASED ON MATERIALITY CONCEPT  EXCESS OF SALE VALUE OF ASSET OVER W D VALUE UPTO COST OF ASSET

CAPITAL AND REVENUE EXPENDITURE  DEFERRED REVENUE EXPENDITURE:  LARGE ADVERTISING EXPENDITURE FOR(SAY) LAUNCH OF A PRODUCT  EXPENDITURE FOR RAISING OF FUNDS INCLUDING PREPARATION OF PROJECT REPORT  INITIAL EXPENSES FOR SETTING UP OF A COMPANY