Week 6 – Jss 3 First Term Business Studies Lesson Notes

WEEK 6
TOPIC: TRIAL BALANCE
A trail balance is a statement that shows the balances of all ledgers. It is the statement that shows both the debit and credit balances of the ledger. Its extracted before the preparation of final account to test the arithmetical accuracy of the ledger.
Uses of Trial Balance

Rules for preparing Trial Balance

 Particulars                 Dr                Cr

1. Any account without any balance should not be posted to trial balance because it has been closed
2. If your debit side of the trial balance is not equal to the credit side, you have committed one of the following error:-
   1. Error of omission
   2. Error of commission
   3. Error of principle
   4. Error of original entry
   5. Compensating error
   6. Complete reversal of entry

Second method of preparing Trial Balance:

1. Debit items: all assets must be debited e.g. stock, building, motor van, debtors, cash etc.
2. Expenses – all expenses must be debited e.g. wages, rates, depreciation, insurance etc.
3. Credit item – credit all the liabilities e.g. bank loan, creditors, bills payables, capital, accrual expenses, gross profit, net profit, discount received etc.

1^st Method
From the following information of Madam cash Nig. Ltd, open necessary ledger accounts and extract trial balance as at July, 2005.
July 1        started business with             950 cash
July 5        sold goods worth             7000 cash
July 7        purchase a motor van by cash    3200
July 10        pays salaries by cash             400
July 12        paid wages by cash             200
July 14        cash sales                 2000
CASH BOOK

Date	Particulars	F	Cash	Date	Particular	F	Cash
July 1 July 5 July 14    Aug. 1	Capital Sales Sales    Bal. b/d		950 7,000 2,000  9,950 6,150	July 7 July 10 July 12	Motor van Salary Wages Bal. c/d		3,200 400 200 6,150 9,950

 LEDGER ACCOUNT
Capital Account
Bal. c/d    950        July 1        Cash        950
        950                        950
                Bal. b/d            950
Sales Account
Bal. c/d        9000    July 5        Cash            7000
                July 14        Cash            2000
            9000                        9000
                Bal. b/d                9000

 Motor Van Account
July 7        Cash        3200    Bal. c/d        3200
                3200                3200
Bal. b/d            3200

 Salary Account
July 10         Cash        400    Bal. c/d         400
                400                400
Bal. b/d            400

 Wages Account
July 12        Cash        200    Bal. c/d        200
                200                200
Bal. b/d            200

 Madam Cash Trial Balance as at 30 July, 2008

Particular	(DR) #	(CR) #
Capital Sales Motor van Salary Wages Cash	3,200 400 200 6150 9,950	950 9000         9,950

 2^nd Method
If the balance of the ledger are given, you should prepare the trial balance quickly.
Examples:
Prepare trial balance from the following:        #
Building                         2000
Capital                            2000
Equipment                         5000
Stock of finished goods                 1000
Motor van                         3000
Creditor                        7000
Accrued                         2000

 Trial Balance
Particular            2000            
Capital                            2000
Equipment             5000
Stock                 1000
Motor Van            3000
Creditor                        7000
Accrued                         2000
            11,000            11,000