Professional Documents
Culture Documents
LEARNING OBJECTIVES
In the previous chapters, you have the ledger. The format of trial balance
learnt how to record and classify the in given in fig. 4.1.
transactions in the various accounts
Trial Balance of ……… as on 31st March 2002
along with balancing there of. All
balances of the accounts are listed in Account Account Debit
Code Title Amount Amount
a statement, called trial balance. It is Rs. Rs.
a summary statement of all balances.
This summary of balances enables us
to check the arithmetical accuracy of
the transactions recorded in the ledger Fig. 4.1 : Showing Format of a Trial Balance
accounts. Since every debit has a
corresponding credit, the total of debits The trial balance is prepared at the
should be equal to the total of credits end of a chosen period which may
in the trial balance. This chapter either be monthly, quarterly, half-
explains the meaning and process of yearly or annually or as and when
preparation of trial balance. It is required. Since, every debit should
followed by a discussion of different have a corresponding credit as per the
types of errors and their rectification. rules of the double entry system, the
total of the debit and credit balances
4.1 Meaning of Trial Balance should tally. In case there is a
A trial balance is a summary of dif ference, one has to check the
balances of all accounts recorded in correctness of the balances brought
forward from the respective accounts. in the trial balance are equal, it is
This type of checking of accounts leads assumed that the posting and
to ascertainment of arithmetical balancing of ledger accounts is
accuracy of the balances of various arithmetically accurate.
accounts in a summarized form.
Besides checking the arithmetical 4.2.2 To Help in Locating Errors
accuracy, trial balance also aims at Whenever the trial balance does not
ascertaining the correctness of the tally, the accountant know that errors
nature of balances in relation to the have crept in at the stage of recording,
type of account. All assets, expenses, posting, balancing, or transfer of
receivables shall have debit balances. balances. The accountant, at this
Similarly, all liabilities, revenues, stage, is faced with the problem of
payables will have credit balances errors. It is immaterial whether the
(figure 4.2). amount of difference is small or large.
4.2 Objectives of Preparing a Trial Even a small amount of difference
Balance requires careful attention to be paid
to achieve accuracy in accounts.
In order to pr ovide a summary Once the errors are detected and
statement view of the balances of located, these are rectified and then
various accounts, we need to prepare the corrected trial balance is
the trial balance. This also indicates prepared.
the correct nature of the balances of
various accounts. A trial balance is 4.2.3 To Provide a Basis for the
prepared to fulfill the following Preparation of Financial
objectives: Statements
● check the arithmetical accuracy Since the balances of all accounts
of the ledger accounts; appear in the trial balance, it provides
● help in locating errors; and a basis for the preparation of the
● provide a basis for preparing the financial statements. A tallied trial
financial statements. balance, therefore becomes the first
These objectives are explained in step in the preparation of financial
detail hereunder: statements.
All r evenues and expenses
4.2.1 To Check the Arithmetical accounts from trial balance, are
Accuracy of Accounts transferred to the trading and profit
A trial balance is prepared to check and loss account. All assets,
whether all debits and the liabilities and capital accounts along
corresponding credits are properly with the balance of the profit and loss
recorded in the ledger or not. When account are shown in the balance
the totals of all the debits and credits sheet.
116 ACCOUNTANCY
Solution
Books of Asha General Stores
Cash Book
Receipts Payments
Cash - 001,Bank- 002
Date Particulars L.F. Cash Bank Date Particulars LF Cash Bank
2002 (Rs.) (Rs.) 2002 (Rs.) (Rs.)
Jan 1 Capital 25,000 Jan 1 Purchases 10,000 –
1 Loan from father 50,000 Jan 1 Bank 20,000 –
1 Sales 7500 Jan 2 Purchases 30,000 –
Total c/f 82,500 – Total c/f 60,000
TRIAL BALANCE AND RECTIFICATION OF ERRORS 119
4 Rent 500
Purchases 7,500
5 Subhash & Co. 5,000
Postage 150
Drawings 7,000
Electricity 550
Wages 250
Balance c/f 38,050 15,000
1,21,400 20,000 1,21,400 20,000
47,6000 47,6000
Solution:
Books of Indu Journal
Suspense Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
2001 Rs. 2001 Rs.
March Balance b/f 9,145 Apr 1 Purchases A/c 500
31 (balancing Sales 5,000
figure in the Office 3,645
trial balance) Equipment
9,145 9,145
Illustration 4 as Rs.32,460.
The trial balance of Anand Dealers (iv) A payment received from Rohan
prepared on 31 December 2000 did not for Rs.49,240 was credited to
tally. The difference was placed in the Roshan’s account.
suspense account on the debit side Rs. (v) Glass purchased for show
39,180. A detailed examination of his windows from Aftab suppliers
books revealed the following mistakes: on a credit for Rs.38,450 was
recorded in the purchases day
(i) A payment of Rs.20,000 to John book. At the time of posting,
was posted to the credit of his their account was credited with
account. Rs.34,850.
(ii) Goods returned by Amrita a You are required to correct the
regular customer for Rs.5,800 above mistakes by passing the
was posted to the credit of sales necessary rectifying errors in the
account General journal and find out amount
(iii) Charges on renovation to the that was transferred to suspense
slow windows of the shop of account where the trial balance did not
Rs.23,640 was debited to the tally.
furniture and fixtures account
130 ACCOUNTANCY
Solution
Date Particulars Debit Credit
Amount Amount
Rs. Rs.
2001, John’s A/c Dr. 40,000
Dec 31 Suspense A/c 40,000
(being wrongly credited, now rectified)
Sales return A/c Dr. 5,800
Sales A/c Dr. 5,800
" Suspense A/c 11,600
(being sales account wrongly credited
and sales returns account not debited,
now rectified)
Suspense A/c Dr. 8,820
" Furniture & Fixtures A/c 8,820
(being furniture & fixture credited wrongly,
now rectified)
Roshan’s A/c Dr. 49,240
" Rohan A/c 49,240
(being correction of wrong entry in Roshan’s
account by correctly crediting Rohan)
1.Furniture and Fixture A/c Dr. 38,450
" Purchases A/c 38,450
(being purchases account wrongly debited,
now stands corrected)
2.Suspense A/c Dr. 3,600
" Aftab A/c 3,600
(being wrong posting to Aftab’s account,
now rectified)
Suspense Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
2001 Rs. 2001 Rs.
April 1
Furniture & Fixtures 8,820 March 31 John 41,800
Dec. Aftab 3,600 Sales Returns 5,800
31 Balance b/f 39,180 Sales 5,800
51,600 51,600
TRIAL BALANCE AND RECTIFICATION OF ERRORS 131
4 Types of Errors
There are four types of errors:
● Errors of Commission
Errors caused due to wrong recording of a transaction, wrong posting, wrong
totaling, wrong balancing, etc.
● Errors of Omission
Errors caused due to omission of recording a transaction either fully or
partially in the books of accounts.
● Errors of Principle
Errors caused due to ignoring the accounting principles which may lead
to wrong classification or identification of receipts and payments between
revenue and capital r eceipts and revenue expense and capital
expenditure.
● Compensating Errors
Two or more errors committed in such a way that they nullify the effect of
each other on the debits and credits.
132 ACCOUNTANCY
5 Rectification of Errors
Errors affecting only one account can be rectified by giving an explanatory note or
by passing a journal entry. Errors which affect two or more accounts are rectified
by passing a journal entry.
EXCERCISES
3. Indicate whether the following accounts will have ‘debit’ or ‘credit’ balances:
(i) Sales Returns
(ii) Carriage Inwards
(iii) Purchases
(iv) Outstanding Wages
(v) Capital Account
(vi) Machinery
(vii) Goodwill
(viii) Cash in Hand
(ix) Cash at Bank
(x) Bills Payable.
Problems
16. Give rectifying journal entries for the following errors:
(i) A sale of goods to Mohit amounting to Rs.2,500 has been wrongly
passed through the purchases book.
(i) Rs. 15,000 paid for Furniture purchased has been charged to
Purchases Account.
(i) A cheque for Rs.15,000 received from Ram K. Gupta was dishonored
and has been posted to the debit of Sales Returns Account.
(i) An amount of Rs.400 due from Mukesh which was written off as a
bad debt was unexpectedly recovered and was posted to the personal
account of Mukesh.
(i) Rs. 12,000 paid by cheque for a printer was charged to the Office
Expense Account instead of Office Equipment account.
TRIAL BALANCE AND RECTIFICATION OF ERRORS 135
19. The trial balance of a book-keeper shows an excess of debits over credits
by Rs.361. This difference is placed in the Suspense Account. Later, the
following errors were discovered.
(i) A credit item of Rs.2490 has been debited to The personal account of
Dinesh as Rs.4290
(ii) Rs.9000 paid for Furniture bought has been charged to Purchases
Account
(iii) A discount allowed to Ramesh has been credited to him as Rs.1450
in place of Rs.1540
(iv) The total of the returns inward book was Rs.10 short.
(v) A cheque for Rs.100 for miscellaneous expense was not posted to
Miscellaneous Expenses Account.
You are required to rectify the errors through Suspense Account and
prepare the Suspense Account.
22. The Trial Balance of New Delhi Dealers as on 31 March 1999, showed a
difference, and on scrutiny, the following discrepancies were observed.
(i) A sales bill for Rs.8,750 was wrongly debited to the customer’s account
as Rs.7,850.
(ii) Sales to Santosh of Rs.4,000 was entered in the sales return book
but was correctly debited to Santosh.
(iii) Bill received from Inderjeet Singh of Rs. 5,000 was entered in the
bills payable book.
(iv) An amount of Rs.6,800 owing by a customer had been omitted from
the list of Sundry Debtors.
(v) Goods bought from M. Kamlesh for an amount of Rs.6,400 has been
credited to his account as Rs. 8,400.
(vi) Rs.987.90 received from Mushtaq was entered in the cash book as
Rs.990.87.
ANSWERS
Multiple Choice
(i). (b); (ii). (c); (iii). (c); (iv). (b); (v). (c); (vi). (c); (vii). (c); (Viii). (c); (ix).
(c); (x). (d).