Trial balance

The trial balance serves the following two major roles:

• It checks the arithmetical accuracy of the ledger. The double entry system requires posting equal amounts to debits and credits. Therefore the trial balance is expected to balance if the arithmetic was correct. If there is a difference in the totals of the debit and credit columns of the trial balance, then some errors were made.

• It simplifies the preparation of the final accounts. The trial balance contains all the accounts extracted from the ledgers. This makes it easy to post the accounts to the final accounts.

Look again at Example 1 of XYZ Traders. The accounts, after being closed, appear as follows:

Capital account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 30	Balance	c/d	50,000	June 1	Cash
			50,000
				July 1	Balance	b/d

Cash account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 1	Capital		50,000	June 2	Furniture
June 5	Sales		3,000	June 4	Purchases
June 11	Pwagu		2,000	June 6	Rent
				June 9	Electricity
				June 12	Drawings
				June 15	Masatu
				June 30	Balance	c/d
			55,000
July 1	Balance	b/d	31,500

Purchases account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 4	Cash		2,000	June 30	Balance	c/d
June 5	John		4,000
June 8	Masatu		6,000
			12,000
July 1	Balance	b/d	12,000

Sales account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 30	Balance	c/d	16,000	June 5	Cash
				June 7	Pwagu
				June 10	Alyoce
			16,000
July 1	Balance	b/d	16,000

Rent account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 6	Cash		500	June 30	Balance	c/d
			500
July 1	Balance	b/d	500

Electricity account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 9	Cash		1,000	June 30	Balance	c/d
			1,000
July 1	Balance	b/d	1,000

And other accounts closing.

1. The balance b/d determines whether the account has a debit or credit balance.

Example 1

Construct the trial balance for XYZ Traders of Example 1.

Solution

XYZ TRADERS

Trial balance as at 30 June 2005

Account	DR	CR
Capital		50,000
Cash	31,500
Furniture	10,000
Purchases	12,000
Sales		16,000
Rent	500
Electricity	1,000
Drawings	7,000
Creditors: John		4,000
Masatu		3,000
Debtors: Pwagu	3,000
Aloyce	8,000
Total	73,000	73,000

The two columns balance. This confirms that the accounts are correct.

Debit balances

Cash account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 1	Capital		50,000	June 2	Furniture
June 5	Sales		3,000	June 4	Purchases
June 11	Pwagu		2,000	June 6	Rent
				June 9	Electricity
				June 12	Drawings
				June 15	Masatu
				June 30	Balance	c/d
			55,000
July 1	Balance	b/d	31,500

Furniture account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 2	Cash		10,000	June 30	Balance	c/d
			10,000
July 1	Balance	b/d	10,000

Purchases account

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 4	Cash		2,000	June 30	Balance	c/d
June 5	John		4,000
June 8	Masatu		6,000
			12,000
July 1	Balance	b/d	12,000

John account (debit balance)

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 30	Balance	c/d	4,000	June 5	Purchases
			4,000
				July 1	Balance	b/d

Masatu account (debit balance)

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 15	Cash		3,000	June 8	Purchases
June 30	Balance	c/d	3,000
			6,000
				July 1	Balance	b/d

Credit balances

John account (credit balance)

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 30	Balance	c/d	4,000	June 5	Purchases
			4,000
				July 1	Balance	b/d

Masatu account (credit balance)

DR				CR
Date	Particular	Folio	Amount	Date	Particular	Folio
June 15	Cash		3,000	June 8	Purchases
June 30	Balance	c/d	3,000
			6,000
				July 1	Balance	b/d