Real Life Example of Trial Balance in Accounting

Trial Balance – Example #3 ; ledger accountLedger Account · on a particular date. The trial balance will have Debit and credit columns, the account which is ... SkiptoprimarynavigationSkiptomaincontentSkiptoprimarysidebarSkiptofooter Home»AccountingResources»BookkeepingResources»TrialBalanceExamplesArticlebyMadhuriThakurReviewedbyDheerajVaidya,CFA,FRM TrialBalanceisthereportofaccountinginwhichendingbalancesofdifferentgeneralledgerofthecompanyareavailable;Forexample,utilityexpensesduringaperiodincludethepaymentsoffourdifferentbillsamounting$1,000,$3,000,$2,500and$1,500,sointrialbalancesingleutilityexpensesaccountwillbeshownwiththetotalofallexpensesamounting$8,000. TrialBalanceExamples Inthissection,wewilltouchsomeofthereal-lifeexamplestounderstandthetrialbalance.AsweknowthattrialbalanceisthefirststatementtobepreparedtocheckthecorrectnessofthedoubleentryofanyaccountsTheDoubleEntryOfAnyAccountsThedouble-entryaccountingsystemreferstothedoubleeffectofeveryjournalentry.Itisbasedonthedualaspecti.e.DebitandCreditandthisprinciplestatesthatforeverydebit,theremustbeanequalandoppositecredit.readmore,soitisimportanttounderstandthetrialbalancetomaketocorrectaccountsofthestatementofanyfirm.Thetrialbalancewouldbepreparedforeachandeveryaccountofanyfirm,butwewilltakesomeimportantproblemsandtrytosolvethemtounderstandtheworkingoftrialbalance. Itisnotpossibletoexplaineachandeveryaccounttoexplainthetrialbalance,butwewilltrytotouchthoseexamples,whichareimportantandcrucialinaccountingforeveryfirm. TrialBalance–Example#1 Asperthedefinitionofthetrialbalance,itisthefirststepinthepreparationoftheaccountsofthestatementofanyfirm.Itisbasicallypreparedattheendoftheyearofanaccountingperiodtoassistinthepreparationofthefinalaccounts. Let’stakethefirstexampleofNSBHandicraft.WewillpreparethetrialbalanceasperthetransactionsshowninbelowtableforthefirmonMarch31st,2019 Asperthetransactionsareshownabove,nowwewillprepareTrialBalanceforNSBHandicraftasonMarch31st,2019. AsperthetrialbalancepreparedforNSBHandicraftasonMarch,31st2019,wecanseethatthetotaloftheDebitsideisthesameasatotalofthecreditsideinthetrialbalance.NowweproceedforthepreparationofotherfinancialstatementsFinancialStatementsFinancialstatementsarewrittenreportspreparedbyacompany'smanagementtopresentthecompany'sfinancialaffairs overagiven period(quarter,sixmonthlyoryearly).Thesestatements,whichincludetheBalanceSheet,IncomeStatement,CashFlows,andShareholdersEquityStatement,mustbepreparedinaccordancewithprescribedandstandardizedaccountingstandardstoensureuniformityinreportingatalllevels.readmoresuchasProfitandLossAccount,Balancesheet,etc.byusingtrialbalance. Trialbalanceisthefirststepforpreparingfinancialstatementsofanyfirm.Supposeifthetotalofbothdebitandcreditsideisnotmatching,thenwehavetocheckthejournalentriesagainandfindoutwithtransactionwhatwasaccountedwrongly. TrialBalance–Example#2 TrialBalanceistheendoftheaccountingprocessandthefirststepinpreparingafinalaccountofthefirm.Inthedouble-entryaccountingsystemDouble-entryAccountingSystemDoubleEntryAccountingSystemisanaccountingapproachwhichstatesthateach&everybusinesstransactionisrecordedinatleast2accounts,i.e.,aDebit&aCredit.Furthermore,thenumberoftransactionsenteredasthedebitsmustbeequivalenttothatofthecredits.readmore,eachdebitbalancewillhavethesameamountofcreditbalance.Ifthereisadifferencebetweenalldebitbalancesandcreditbalance,therewouldbesomeerrorsinthepostingoftheaccountingtransactionsAccountingTransactionsAccountingTransactionsarebusinessactivitieswhichhaveadirectmonetaryeffectonthefinancesofaCompany.Forexample,Applerepresentingnearly$200billionincash&cashequivalentsinitsbalancesheetisanaccountingtransaction.readmore. Let’sconsideroneanotherexampletounderstandthemethodofpreparationoftrialbalance.BelowarethebalancesfromthebooksofJyotiEnterprisesasonMarch31st,2019. NowwewillpreparetrialbalanceforJyotiEnterprisesasonMarch31st,2019asperthebalanceisshownabove, AsperthetrialbalancepreparedforJyotiEnterprises,wecanseethatbothsidesofthetrialbalancearethesame,whichindicatesthatthereisnoerrorinledgerpostingduringthefinancialyear.Trialbalanceshowsalldebitandcreditbalanceinonestatement,andfromhere,wewillstartpreparingotherfinancialstatementsofthefirm. TrialBalance–Example#3 Fromtheabovetwoexamples,wehaveseenthatbothdebitandcreditsidebalancesarethesameinthetrialbalance,whichindicatesthatthereisnoerrorinpostingaccountingentries.Sometimesduetonon-awarenessoftheaccountantaboutanyparticulartransaction,theaccountantwouldpostthattransactioninasuspenseaccount,whichwouldbeclearedafterdiscussionwiththeconcernedpersonforthatparticulartransaction,andtheaccountantwouldtrytomatchtheendbalanceinthetrialbalance. Inthesameway,wewillpreparetrialbalanceforGoGreenPvt.Ltdasperthebalanceisshownbelowfromthebooksoftheaccounts, TrialBalancewillbe, TrialBalanceisnotanaccount,butitisascheduleofallthebalancesofallledgeraccountLedgerAccountLedgerinAccounting,alsocalledtheSecondBookofEntry,isabookthatsummarizesallthejournalentriesintheformofdebits&creditstouseforfuturereference&createfinancialstatements.readmoreonaparticulardate.ThetrialbalancewillhaveDebitandcreditcolumns,theaccountwhichishavingadebitbalanceDebitBalanceInaGeneralLedger,whenthetotalcreditentriesarelessthanthetotalnumberofdebitentries,itreferstoadebitbalance.AdebitbalanceisanetamountoftencalculatedasdebitminuscreditintheGeneralLedgerafterrecordingeverytransaction.readmorewillbewrittenonthedebitside,andtheaccount,whichishavingacreditbalanceHavingACreditBalanceCreditBalanceisthecapitalamountthatacompanyowestoitscustomers&itisreflectedontherightsideoftheGeneralLedgerAccount.Usually,Liabilityaccounts,Revenueaccounts,EquityAccounts,Contra-Expense&Contra-Assetaccountstendtohavethecreditbalance.readmore,willbepostedonthecreditcolumnsidewiththeactualbalanceamount. Conclusion So,whatwehavelearnedabouttrialbalancefromtheaboveexamples. TrialBalanceisthestatementofbalancesofallledger’saccountofanyfirmsonaparticulardate.Thetotalofbothsidesmeansdebit,andcreditsideshouldbeequalasforanytransaction,therewouldbeadebitandcreditforthesameamount.Ifthetotalofthedebitandcreditsideisequal,itmeansthattheledgerpostingforeachandeverytransactionhasbeendonecorrectly.Ifthetotalsofbothsidecolumnsarenotmatching,itmeansthereissomeerrorinledgerpostingforanyparticularaccount,andthedifferencewouldbepostedintoasuspenseaccountandwouldberectifiedpostdiscussionwithmanagementandconcernedteam. RecommendedArticles ThishasbeenaguidetoTrialBalanceexamples.Herewediscusssomeofthereal-lifeexamplestounderstandthetrialbalanceandlearnhowtoprepareastatementofTrialBalanceasperthetransactions.Youcanlearnmoreaboutaccountingfromthefollowingarticles– Post-ClosingTrialBalanceFormatAdjustedTrialBalanceTrialBalancevsBalanceSheetBalanceSheetReconciliationDefinition ReaderInteractions LeaveaReplyCancelreplyYouremailaddresswillnotbepublished.Requiredfieldsaremarked*CommentName* Email* Website Savemyname,email,andwebsiteinthisbrowserforthenexttimeIcomment. Δ PrimarySidebar GetFREEAccessto500+VideoTutorials SubscribetoYoutubeNow! FooterCompany Resources Courses x Let’sGetStarted EmailID* Pleaseselectthebatch Upcomingbatch* 19th/20thSeptember2020Saturday-Sunday9amISTto5pmIST 26th/27thSeptember2020Saturday-Sunday9amISTto5pmIST x FreeAccountingCourse YouwillLearnBasicsofAccountinginJust1Hour,Guaranteed! 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