Get summaries, questions, answers, solutions, notes, extras, theories, practicles, PDF, and guide of Chapter 7 Trial Balance, NBSE Class 9 Book Keeping (BK) textbook, which is part of the syllabus of students studying under Nagaland Board. These solutions, however, should only be treated as references and can be modified/changed.
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Summary
A trial balance is a statement that shows the balances of all ledger accounts on a specific date. It helps check if the books of accounts are correct. The debit and credit columns should match. If they do, it means the books are at least arithmetically correct. A trial balance is not an account but a statement. It is prepared on a loose sheet of paper. It does not form part of the double-entry system.
The trial balance has many purposes. It checks the arithmetical accuracy of the ledger accounts. It ensures that both aspects of each transaction are recorded correctly. It also helps in preparing final accounts like the trading and profit and loss account and the balance sheet. It provides a summarized view of assets, liabilities, incomes, and expenses.
However, a trial balance has limitations. Some errors cannot be detected through it. Compensatory errors happen when excess debits or credits cancel out. Errors of commission occur when entries are made to the wrong accounts. Errors of principle happen when entries are made using the wrong type of account. Errors of omission occur when transactions are not recorded. If a voucher is missed in the day book, it will not show in the trial balance. Wrong amounts entered in the day book also go unnoticed.
To prepare a trial balance, all ledger accounts must first be balanced. Accounts with debit balances are shown in the debit column. Accounts with credit balances are shown in the credit column. Accounts with no balance are not included. The totals of both sides are then added. If they match, the trial balance is said to be tallied.
There are certain rules for preparing a trial balance. Assets have debit balances and are shown in the debit column. Liabilities have credit balances and are shown in the credit column. Capital accounts have credit balances. Drawings accounts have debit balances. Purchases accounts always have debit balances. Sales accounts always have credit balances. Expenses and losses have debit balances. Incomes and gains have credit balances.
Closing stock usually does not appear in the trial balance unless it is brought into accounts before preparing it. There are different methods to prepare a trial balance. One method is the balance method. In this method, the trial balance is prepared from the balances of ledger accounts instead of their debit and credit totals. Only accounts with balances are included. This method is simple and widely used.
Illustrations and examples are provided to explain how journal entries are passed, posted in ledgers, and how a trial balance is prepared. Practical problems help understand the process better. Short answer and long answer questions test knowledge about the trial balance, its features, functions, advantages, and limitations. Multiple-choice questions check understanding of basic concepts. Assertion-reason and statement-based questions assess deeper comprehension. Case studies apply theoretical knowledge to real-life scenarios.
Textbook solutions
Multiple Choice Questions (MCQs)
1. A trial balance is
(a) a statement
(b) a summary
(c) an account
(d) none of these
Answer : a. a statement
2. Trial balance checks
(a) the honesty of the book keeper
(b) accuracy of the book keeper
(c) the arithmetical accuracy of books
(d) none of these
Answer : c. the arithmetical accuracy of books
3. A trial balance is prepared with the help of
(a) Trading account
(b) Journal
(c) Balance sheet
(d) Ledger Accounts
Answer : d. Ledger Accounts
4. Which of the following always has a credit balance?
(a) Cash
(b) Debtors
(c) Creditors
(d) Rent paid
Answer : c. Creditors
5. Which item shows a debit balance in the Trial Balance?
(a) Purchase Return
(b) Sales
(c) Salary Outstanding
(d) Prepaid Expense
Answer : d. Prepaid Expense
6. Which of the following may have a debit or credit balance?
(a) Cash
(b) Bank account
(c) Land and building
(d) Creditors
Answer : b. Bank account
7. The verification that the debits and credits in the ledger are equal is called
(a) Journal
(b) Ledger
(c) Trial balance
(d) None of these
Answer : c. Trial balance
8. Errors which affect one account can be:
(a) Errors of principle.
(b) Errors of posting
(c) Errors of omission
(d) None of these
Answer : b. Errors of posting
True/False
1. Trial Balance is just a statement and not an account.
Answer: True
2. A tallied trial balance is not a conclusive proof of accuracy of accounts.
Answer: True
3. Return outward account always has a debit balance and hence is shown in the debit column of a Trial Balance.
Answer: False
4. Accounts of incomes and gains have credit balances and are shown in the credit column of a Trial Balance.
Answer: True
Assertion Reason Based Questions
Choose the correct option :
A. Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A).
B. Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A).
C. Only Assertion (A) is correct.
D. Only Reason (R) is correct.
1. Assertion A Trial Balance is prepared for ascertaining the arithmetical accuracy of ledger accounts.
Reason The sum of the debit and credit columns of trial balance is equal, it is assumed that the posting to the ledger accounts, is correct.
Answer: A
2. Assertion Compensatory errors are those errors which can be easily disclosed by the trial balance.
Reason Compensatory errors arise due to excess debit or under debit of accounts but the same are neutralized by excess credits or under credits in the same account or other accounts.
Answer: D
Statement Based Questions
Choose the correct option from the options given below:
A. Statement I is true and II is false.
B. Statement II is true and I is false.
C. Both the statements are false.
D. Both the statements are true.
1. Statement I: Trial Balance is summarised statement of balances of accounts on a certain date.
Statement II: Trial Balance can be prepared only when all the ledger accounts have been balanced.
Answer: D
2. Statement I: Trial Balance records only those ledger accounts which shows debit and credit balances, if an account shows no balance then that account is not included in the trial balance.
Statement II: Each ledger account is balanced and then trial balance is prepared from the balances of ledger accounts instead of their debit and credit totals.
Answer: D
Short Answer Type-l Questions
1. Define Trial Balance.
Answer : A Trial Balance is a schedule of debit and credit totals or balances of all the Ledger accounts, drawn at any date, at periodic intervals or at the end of a financial period. It is prepared with the help of ledger balances to find out whether debit total agrees with credit total.
2. Write two features of Trial Balance.
Answer : Two features of Trial Balance are: (i) It is just a statement, and not an account. (ii) It contains the list of balances of all Ledger Accounts and Cash Book.
3. Is Trial Balance an account?
Answer : No, a Trial Balance is not an account; it is just a statement.
4. Write one function of Trial Balance.
Answer : One function of Trial Balance is ascertaining the arithmetical accuracy of ledger accounts. If the sum of the debit and credit columns of the trial balance is equal, it is assumed that the posting to the ledger accounts is correct.
Short Answer Type-Il Questions
1. Define Trial Balance. Give features of Trial Balance.
Answer : A Trial Balance is defined as “The statement prepared with the help of ledger balances, at the end of the financial year or at any other date, to find out whether debit total agrees with credit total, is called a Trial Balance.” (William Pickles). It is a statement, not an account, containing the balances of all ledger accounts as at a given date, arranged in debit and credit columns placed side by side, prepared to check the arithmetical accuracy of ledger postings.
The features of a Trial Balance are:
(i) It is just a statement and not an account.
(ii) It contains the list of balances of all Ledger Accounts and Cash Book.
(iii) It is neither a part of the double-entry system nor does it appear in the actual books of accounts; it is usually prepared on a loose sheet of paper.
(iv) It is prepared on a specific date.
(v) It checks the arithmetical accuracy of the Ledger.
(vi) A tallied trial balance is not a conclusive proof of the accuracy of accounts.
2. Write four advantages of Trial Balance.
Answer : The advantages of a Trial Balance are:
(i) It provides a useful check upon the arithmetical accuracy of ledger accounts. If the sum of the debit and credit columns of the trial balance is equal, it is assumed that the posting to the ledger accounts is correct.
(ii) It serves as a proof of the completion of the double-entry system, ensuring that for every debit, there is an equal credit.
(iii) It acts as a summarised statement of balances of accounts on a certain date, enabling one to know the details of assets, liabilities, expenses, losses, incomes, etc.
(iv) It helps in the preparation of final accounts by providing a basis for the preparation of the Trading and Profit & Loss Account and the Balance Sheet.
3. What are the limitations of Trial Balance?
Answer : The limitations of a Trial Balance are:
(i) Compensatory Errors: These errors arise due to excess debits or under-debits of accounts but are neutralized by excess credits or under-credits in the same account or other accounts, making them undetectable through the trial balance.
(ii) Error of Commission: These occur when entries are made to the correct amount and appropriate side but to the wrong account of the correct type, which does not affect the totals.
(iii) Error of Principle: These occur when entries are made to the correct amount and appropriate side but to the wrong type of account, which also does not affect the totals.
(iv) Error of Omission: These occur when a transaction is not recorded in the books of entry, leaving no impact on the trial balance.
4. What points are remembered while preparing Trial Balance?
Answer : The following points are remembered while preparing a Trial Balance:
(i) The Ledger Accounts showing debit balances are shown in the debit column of the Trial Balance, and those showing credit balances are shown in the credit column.
(ii) Accounts of assets such as Plant and Machinery, Furniture and Fixtures, Land and Building, Motor Car, Bills Receivable, Goodwill, Trademarks, Patents and Copyright, Cash in Hand, etc., have a debit balance and are shown in the debit column.
(iii) Bank balance may be debit or credit. If it is debit, it is shown in the debit column; if credit, it is shown in the credit column.
(iv) Accounts of liabilities such as bank overdraft, bills payable, creditors, etc., have a credit balance and are shown in the credit column.
(v) Capital account shows a credit balance and is written on the credit side, while Drawings account shows a debit balance and is written on the debit side.
(vi) Purchases Account always has a debit balance, Sales Account always has a credit balance, Returns Inward Account has a debit balance, and Returns Outward Account has a credit balance.
Long Answer Type Questions
1. Explain Trial Balance. Give its functions and format.
Answer : A Trial Balance is a statement prepared with the help of ledger balances, at the end of a financial year or at any other date, to find out whether the debit total agrees with the credit total. It is a summarised statement of balances of accounts on a certain date, enabling one to know the details of assets, liabilities, expenses, losses, incomes, etc.
The functions of a Trial Balance include:
(i) Ascertaining the arithmetical accuracy of ledger accounts: If the sum of the debit and credit columns of the trial balance is equal, it is assumed that the posting to the ledger accounts is correct.
(ii) Completion of double entry: The agreement of the two sides of the Trial Balance is proof, at least, of the fact that for every debit, an equal credit has been given.
(iii) Statement of ledger account balances: It provides a summarised statement of balances of accounts on a certain date.
(iv) Helps in the preparation of final accounts: A trial balance serves as a connecting link between the ledger and the final accounts, providing a basis for the preparation of Trading and Profit & Loss Account and a Balance Sheet.
(v) Helps to obtain a summary of the ledger accounts: A Trial Balance summarises all the ledger accounts, giving information about the assets, liabilities, income, and expenses.
The format of a Trial Balance is as follows:
TRIAL BALANCE as at [specific date]
| Heads of Accounts | L.F. | Debit Balance (₹) | Credit Balance (₹) |
| Total |
In this format, careful attention must be given to the following points:
(i) It is prepared on a particular date which should be written on the top.
(ii) In the first column, the name of all Ledger accounts are written. No account should be omitted, otherwise the Trial Balance will not agree.
(iii) In the second column, the Ledger Folio of the respective account must be mentioned in the respective column.
(iv) In the third column, the debit balance, if any, is written.
(v) In the fourth column, the credit balance is written.
(vi) The two columns are totalled at the end.
2. What is Trial Balance? Explain the Balance Method of Trial Balance with the help of examples.
Answer : A Trial Balance is a statement containing the balances of all ledger accounts, as at any given date, arranged in the form of debit and credit columns placed side by side and prepared with the object of checking the arithmetical accuracy of ledger postings.
The Balance Method of preparing a Trial Balance involves recording only those ledger accounts which show debit and credit balances. If an account shows no balance, then that account is not included in the trial balance. According to this method, a trial balance is prepared on the basis of balances of accounts. Each ledger account is balanced, and then the Trial Balance is prepared from the balances of ledger accounts instead of their debit and credit totals. This method is simple, requires less work, and is mostly used.
For example, consider the following balances extracted from the books of Jacob & Co.: Cash Account: ₹71,200 (Debit Balance) Purchases Account: ₹60,000 (Debit Balance) Sales Account: ₹45,000 (Credit Balance) Capital Account: ₹90,000 (Credit Balance)
Using the Balance Method, these balances would be recorded in the Trial Balance as follows: TRIAL BALANCE as at 31st March, 2023 Heads of Accounts L.F. Debit Balance (₹) Credit Balance (₹) Cash 71,200 Purchases 60,000 Sales 45,000 Capital 90,000 Total 1,31,200 1,35,000
Practical Problems
Questions
1. Journalise the following transactions, post them into the Ledger, and also prepare a Trial Balance:
| Date | Transactions |
|---|---|
| 2022 | |
| April 1 | Michael commenced business with cash ……………………………….. ₹1,00,000 |
| April 3 | Bought goods …………………………………………………………. ₹5,000 |
| April 4 | Sold goods to Garyson ………………………………………………… ₹4,000 |
| April 10 | Bought goods from Kevi ………………………………………………… ₹8,000 |
| April 15 | Paid trade expenses …………………………………………………… ₹2,000 |
| April 20 | Received cash from Gopal and allowed discount ₹50 …………………….. ₹3,950 |
| April 25 | Paid wages …………………………………………………………….. ₹700 |
| April 27 | Paid Kevi in full settlement …………………………………………… ₹7,700 |
| April 30 | Paid rent …………………………………………………………….. ₹1,500 |
Solution: Check below
2. Given below are the balances as shown by James on April 1, 2022, as well as his transactions for the month. Enter them in the Journal, post to the Ledger, and extract a Trial Balance therefrom:
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) |
|---|---|---|---|---|---|
| 2022 | 2022 | ||||
| April 1 | Cash in Hand | 2,000 | April 10 | Sold goods to Aiden | 1,000 |
| April 1 | Stock of goods | 45,000 | April 13 | Wages paid | 200 |
| April 1 | Bank Balance | 20,000 | April 15 | Received from Noah | 6,000 |
| April 1 | Due to Eli | 2,500 | April 15 | Paid into Bank | 10,000 |
| April 1 | Due from Aiden | 3,500 | April 18 | James took for private use | 500 |
| April 3 | Sold goods to Noah | 10,000 | April 23 | Sold goods to Lucas | 7,000 |
| April 5 | Cash sales | 4,000 | April 24 | Bought goods from Ryan | 6,500 |
| April 7 | Sold to Andrew | 500 | April 25 | Wages | 300 |
| April 8 | Bought goods from Eli | 1,500 | April 30 | Cash sales | 1,440 |
Solution: Check below
3. Prepare a Trial Balance from the following balances of Mr. Jaxon as at 31st March, 2022:
| Name of Accounts | Amount (₹) | Name of Accounts | Amount (₹) |
|---|---|---|---|
| Opening Stock | 30,000 | Furniture | 6,400 |
| Purchases | 80,000 | Machinery | 54,000 |
| Purchases Returns | 6,000 | Debtors | 64,000 |
| Sales | 1,78,200 | Creditors | 9,000 |
| Sales Returns | 7,300 | Bills Receivable | 4,200 |
| Rent | 1,700 | Bills Payable | 2,000 |
| Salaries | 5,800 | Cash in Hand | 9,000 |
| Goodwill | 800 | Bank Overdraft | 15,000 |
| Commission Received | 1,200 | Interest on Overdraft | 1,000 |
| Discount | 800 | Capital | 60,000 |
| Drawings | 8,000 |
Solution: Check below
4. Redraft correctly the Trial Balance given below:
| Debit Balances | Amount (₹) | Credit Balances | Amount (₹) |
|---|---|---|---|
| Capital | 8,000 | Debtors | 7,580 |
| Scrap Depreciation Recovered | 250 | Bank Deposits | 2,750 |
| Creditors | 1,250 | Discount Allowed | 40 |
| Returns Outward | 350 | Drawings | 600 |
| Bank Overdraft | 1,570 | Returns Inward | 450 |
| Rent | 360 | Sales | 13,690 |
| Salaries | 850 | Bills Payable | 1,350 |
| Trade Expenses | 300 | Grant Received | 1,000 |
| Cash in Hand | 210 | ||
| Opening Stock | 2,450 | ||
| Purchases | 11,870 | ||
| 27,460 | 27,460 |
Solution: Check below
5. From the following list of balances extracted from the books of David, prepare a Trial Balance as at 31st March, 2022. The amount required to balance should be entered as capital:
| Amount (₹) | Amount (₹) | ||
|---|---|---|---|
| Purchases | 20,00,000 | Proprietor’s withdrawals | 80,000 |
| Stock on 1st April, 2021 | 3,00,000 | Sundry Debtors | 4,50,000 |
| Sales | 50,00,000 | Sundry Creditors | 2,60,000 |
| Sundry Expenses | 10,000 | Bad Debts | 20,000 |
| Leasehold Premises | 6,00,000 | Investments @ 10% | 5,50,000 |
| Freehold Premises | 19,00,000 | Interest on Investments | 40,000 |
| Return Inwards | 20,000 | Long-term borrowings | 7,00,000 |
| Furniture and Fixtures | 4,00,000 | Loan from ICICI Bank | 8,20,000 |
| Equipment | 10,00,000 | Interest on Loan | 60,000 |
| Repairs to Equipment | 6,000 | Petty Cash Account | 1,000 |
| Depreciation | 84,000 | Balance at Bank | 39,000 |
| Stock on 31.3.2022 (not adjusted) | 5,00,000 |
Solution: Check below
6. The following Trial Balance has been prepared by an inexperienced accountant. Redraft it in a correct form:
| Name of Accounts | L.F. | Debit Balance (₹) | Credit Balance (₹) |
|---|---|---|---|
| Cash in Hand | 5,000 | ||
| Machinery | 23,000 | ||
| Purchases | 50,000 | ||
| Sundry Debtors | 25,000 | ||
| Carriage Inward | 2,000 | ||
| Carriage Outward | 1,000 | ||
| Wages | 17,000 | ||
| Rent and Taxes | 5,000 | ||
| Sundry Creditors | 18,000 | ||
| Discount Allowed | 1,000 | ||
| Returns Outwards | 2,000 | ||
| Returns Inwards | 4,000 | ||
| Capital | 23,000 | ||
| Drawings | 5,000 | ||
| Bank Loan | 14,000 | ||
| Interest on Loan | 1,000 | ||
| Opening Stock | 30,000 | ||
| Sales | 1,10,000 | ||
| Discount Received | 2,000 | ||
| Total | 1,69,000 | 1,69,000 |
Solution: Check below
Solutions
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Extras
Additional questions and answers
1. What is a Trial Balance?
Answer : Trial Balance is a schedule of debit and credit totals or balances of all the Ledger accounts, drawn at any date, at periodic intervals or at the end of a financial period.
25. Explain the procedure of preparing a Trial Balance by the Balance Method.
Answer : The procedure of preparing a Trial Balance by the Balance Method is as follows:
- Balancing Ledger Accounts : Each ledger account is balanced to determine whether it has a debit or credit balance. If an account does not have a balance (i.e., the debit and credit totals are equal), it is not included in the Trial Balance.
- Listing Balances : All ledger accounts showing debit balances are listed in the debit column of the Trial Balance, and all ledger accounts showing credit balances are listed in the credit column of the Trial Balance.
- Ensuring Completeness : Careful attention is given to ensure that no account is omitted. Omitting an account would result in the Trial Balance not agreeing.
- Totalling Columns : The debit and credit columns of the Trial Balance are totalled at the end. If the totals of both sides are equal, it is said that the Trial Balance is tallied.
- Preparing on a Specific Date : The Trial Balance is prepared on a particular date, which should be clearly mentioned at the top.
- Including Ledger Folio : In the second column of the Trial Balance, the Ledger Folio (L.F.) of the respective account must be mentioned.
- Writing Balances : In the third column, the debit balance, if any, is written, and in the fourth column, the credit balance is written.
Additional MCQs
1. What is a trial balance?
A. Statement
B. Account
C. Journal
D. Ledger
Answer: A. Statement
40. Which account always shows a debit balance in the trial balance?
A. Sales account
B. Capital account
C. Purchases account
D. Creditors account
Answer: C. Purchases account
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