11
The following facts are discussed in this chapter.
11.1 Introduction to the trial balance
11.2 Posting transactions from prime entry books to the ledger
11.3 Balancing off of ledger accounts
11.4 Preparation of the trial balance
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11.1 Introduction to trial balance
When preparing ledger accounts based on the double entry principles, the value
of a transaction is recorded in the debit side of one account and in the credit side
of the other relevant account. As a result of this, after balancing off the ledger
accounts, there are debit and credit balances. If the transactions are recorded and
ledger accounts are balanced correctly the totals of debit and credit balances should
be equal. The list which is prepared at the end of the period by including all the
debit and credit balances of ledger accounts is called as the trial balance. The trial
balance is not an account. It is mere a list of balances and could be considered as a
summary of the ledger.
If the debit and credit entries have been recorded correctly in ledger accounts and
those accounts have been balanced correctly, the total of the debit column of the
trial balance should agree with the total of the credit column of the trial balance.
If the trial balance agrees, following two facts can be confirmed.
1. The values debited to the accounts are equal to the values credited to the accounts
2. Ledger accounts have been balanced correctly (i.e. there is mathematical accuracy).
Following are the balances of accounts of Janakantha's business as at 30.06.20xx
who commenced his business on 01.01.20xx
Rs.
Cash 40 000
Purchases 150 000
Sales 365 000
Debtors 35 000
Creditors 24 000
Insurance charges 6 000
Furniture 20 000
Discounts received 8 000
Discounts allowed 4 000
Motor vehicles 400 000
Rent payments 30 000
Stationery expenses 5 000
12 % Investments 50 000
Investment income 3 000
15 % Bank loan 90 000
Capital as at 01.01.20xx 250 000
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The trial balance prepared by including the above balances is shown below.
Janakantha's Business
The trial balance as at 30.06.20xx
Description L.P. Debit Credit
Rs. Rs.
Cash 40 000
Purchases 150 000
Sales 365 000
Debtors 35 000
Creditors 24 000
Insurance Charges 6 000
Furniture 20 000
Discounts received 8 000
Discounts allowed 4 000
Motor vehicles 400 000
Rent payments 30 000
Stationery expenses 5 000
12% Investment 50 000
Investment income 3 000
15% Bank loan 90 000
Capital 250 000
740 000 740 000
11.2 Posting transactions from prime entry books to the ledger
Transactions that take place in an accounting period are recorded in the prime entry
books and thereafter recorded in the ledger accounts. Let us study how to record
transactions in prime entry books, how to post transactions to the ledger and how to
prepare a trial balance using the balances of the accounts in the ledger.
Example :-
The following are the transactions that had occurred in the month
of January, 20xx of Samanala's Business.
Cash receipts and cash payments
01.01.20xx Started the business by investing Rs. 200 000.
02.01 Purchased goods on cash basis Rs. 85 000.
03.01 Opened a bank current account by depositing Rs. 20 000.
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04.01 Obtained a bank loan of Rs. 50 000 in cash.
05.01 Cash sales Rs. 150 000.
08.01 Payment of shop rent Rs. 2 000.
10.01 Received Rs. 11 600 from Priyani (a debtor).
Discount allowed Rs. 400.
12.01 Repayment of bank loan instalment Rs. 3 000.
20.01 Received a cheque worth of Rs. 9 000 from Imasha (a debtor)
25.01 Paid Rs. 7 600 to Surangi (a creditor) and the discount
deducted was Rs. 400.
26.01 Received 5% discount when paid money to settle
Rs. 12 000 debts of Vijitha (a creditor).
Transactions relevant to the bank current account
08.01.20xx Purchased goods for sale by issuing a cheque of Rs. 15 000
11.01 Received a cheque amounting to Rs. 6 200 from Priyani
and discount deducted was Rs. 300. This cheque was
deposited in the bank current account immediately.
18.01 Issued a cheque amounting to Rs. 2 000 for shop rent
27.01 Deposited the cheque received from Imasha on 20.01.20xx
in the bank current accout.
Transactions relating to credit purchases of trading goods.
06.01.20xx From Surangi under invoice No. 45 Rs.24 000
08.01 From Vijitha under invoice No. 116 Rs. 20 000
Transaction relating to credit sales of trading goods
05.01.20xx To Priyani under invoice No. 01 Rs. 19 000
09.01 To Imasha under invoice No. 02 Rs. 25 000
Required
Prepare following for the month ended 31.01.20xx
01. Cash book with discount columns
02. Bank account with discount columns
03. Purchases Journal
04. Sales Journal
05. Relevant ledger accounts
06. Trial balance as at 31.01.20xx
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Dr. Cash book Cr.
Date Description Discount Cash Date Description Discount Cash
01.01.20xx Capital 200 000 02.01.20xx Purchases 85 000
04.01 Bank loan 50 000 03.01 Bank 20 000
05.01 Sales 150 000 08.01 Rent 2 000
10.01 Priyani (Debtor) 400 11 600 12.01 Bank loan 3 000
20.01 Imasha (Cheque) 9 000 25.01 Surangi (Creditors) 400 7 600
26.01 Wijitha (Creditors) 600 11 400
27.01 Bank (Imasha) 9 000
31.01 Balance c/d 282 600
400 420 600 1000 420 600
01.02 Balance b/f 282 600
Dr. Bank account Cr.
Date Description Discount Cash Date Description Discount Cash
03.01.20xx Cash 20 000 08.01.20xx Purchases 15 000
11.01 Priyani (Debtors) 300 6 200 18.01 Rent 2 000
27.01 Cash (Imasha) 9 000 31.01 Balance c/d 18 200
35 200 35 200
01.02 Balance b/f 18 200
Purchases journal
Date Invoice No. Description Value Rs.
06.01.20xx 45 Surangi 24 000
08.01 116 Wijitha 20 000
31.01 Debited to purchases account 44 000
Sales journal
Date Invoice No. Description Value Rs.
05.01.20xx 01 Priyani 19 000
09.01 02 Imasha 25 000
31.01 Credited to sales account 44 000
Dr. Capital Account Cr.
Date Description Value Rs. Date Description Value Rs.
31.01.20xx Balance c/d 200 000 01.01.20xx Cash 200 000
200 000 200 000
01.02 Balance b/f 200 000
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Dr. Purchases account Cr.
Date Description Value Rs. Date Description Value Rs.
02.01.20xx Cash 85 000 31.01.20xx Balance c/d 144 000
08.01 Bank 15 000
31.01 Creditors 44 000
144 000 144 000
01.02 Balance b/f 144 000
Dr. Bank loan account Cr.
Date Description Value Rs. Date Description Value Rs.
12.01.20xx Cash 3 000 04.01.20xx Cash 50 000
31.01 Balance c/d 47 000
50 000 50 000
01.02 Balance b/f 47 000
Dr. Priyani (Debtor) Cr.
Date Description Value Rs. Date Description Value Rs.
05.01.20xx Sales 19 000 10.01.20xx Cash 11 600
10.01 Discount 400
11.01 Bank 6 200
11.01 Discount 300
31.01 Balance c/d 500
01.02 19 000 19 000
Balance b/f 500
Dr. Imasha (Debtor) Cr.
Date Description Value Rs. Date Description Value Rs.
09.01.20xx Sales 25 000 20.01.20xx Cash 9 000
31.01 Balance c/d 16 000
25 000 25 000
01.02 Balance b/f 16 000
Dr. Surangi (Creditor) Cr.
Date Description Value Rs. Date Description Value Rs.
25.01.20xx Cash 7 600 06.01.20xx Purchases 24 000
25.01 Discount 400
31.01 Balance c/d 16 000
24 000 24 000
01.02 Balance b/f 16 000
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Dr. Vijitha (Creditor) Cr.
Date Description Value Rs. Date Description Value Rs.
26.01.20xx Cash 11 400 08.01.20xx Purchases 20 000
26.01 Discount 600
31.01 Balance c/d 8 000
20 000 20 000
01.02 Balance b/f 8 000
Dr. Discount allowed account Cr.
Date Description Value Rs. Date Description Value Rs.
31.01.20xx Debtors 400 31.01.20xx Balance c/d 700
31.01 Debtors 300
700 700
01.02 Balance b/f 700
Discount received account
Dr. Cr.
Date Description Value Rs. Date Description Value Rs.
31.01.20xx Balance c/d 1 000 31.01.20xx Creditors 1 000
1 000 1 000
01.02 Balance b/f 1 000
Dr. Sales account Cr.
Date Description Value Rs. Date Description Value Rs.
31.01.20xx Balance c/d 194 000 05.01.20xx Cash 150 000
31.01 Debtors 44 000
194 000 194 000
01.02 Balance b/f 194 000
Dr. Shop rent account Cr.
Date Description Value Rs. Date Description Value Rs.
08.01.20xx Cash 2 000 31.01.20xx Balance c/d 4 000
18.01 Bank 2 000
4 000 4 000
01.02 Balance b/f 4 000
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Samanala Business
The trial balance as at 31.01.20xx
Description L.P. Dr. Rs. Cr. Rs.
Cash 282 600
Bank balance 18 200
Capital 200 000
Discounts allowed 700
Discounts received 1 000
Purchases 144 000
Sales 194 000
Rent 4 000
Debtors - Priyani 500
Imasha 16 000
Creditors - Surangi 16 000
Vijitha 8 000
Bank loan 47 000
466 000 466 000
Activity 01
Prepare the trial balance using the following balances as at 30.09.20xx of Rosal's
business
Debtors 80 000
Fixed deposits 158 000
Creditors 60 000
Discount allowed 4 000
Purchases 250 000
Machinery 120 000
Discount received 9 000
Bank overdraft 15 000
Salaries 20 000
Capital as at 01.01.20xx 200 000
Interest income 8 000
Cash 40 000
Sales 380 000
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Activity 02
The following balances were available as at 31.03.20xx of Thisara enterprises,
which is engaged in purchasing and selling of ready made garments.
Cash in hand 80 000
Bank balance 60 000
Debtors - Pubudu 50 000
- Kumudu 40 000
Capital 150 000
Creditors - Anushka 45 000
- Kanishka 35 000
The transaction occurred in March 20xx are as follows
Credit purchases
Listed Value
Date Invoice No. Other information
Rs.
05.03.20xx 45 (Anushka) 38 000 Trade discount deducted 10%
08.03 56 (Kanishka) 42 000 -
12.03 48 (Anushka) 34 000 Trade discount deducted 5%
18.03 59 (Kanishka) 25 000 Trade discount deducted 4%
Credit sales
Date Invoice No. Other information
07.03.20xx 62 (Pubudu) 20 shirts at Rs. 1 500 each
10.03 63 (Kumudu) 25 trousers at Rs. 2 000 each
15.03 64 (Pubudu) 40 children ware at Rs. 600 each
20.03 65 (Kumudu) 20 sarees at Rs. 1 800 each
The sales policy of the business is to give a 10% trade discount for all credit sales.
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Receipts and other related information
Cash Cheque
Date Other information
Rs. Rs.
02.03 Sales 20 000 5 000 Deposited the cheque immediately in the bank
8 500 -
03.03 From Pubudu
06.03 From Kumudu 12 400 This cheque was deposited on
06.03.20xx in the bank current account
07.03 From Pubudu 16 000 12 000 Cheque was deposited on 10.03.20xx in the
bank current account
13.03 From Kumudu 8 000
Payments and related information
Date Cash Rs. Cheque Rs.
09.03 To Anushka - 13 000
10.03 To Kanishka 15 400 -
11.03 Purchases 16 000 14 000
20.03 Salary 8 000 12 000
22.03 To Kanishka 16 000
Required :-
01. Cash book
02. Bank account
03. Purchase journal
04. Sales journal
05. Relevant ledger accounts
06. The trial balance as at 31.03.20xx
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