Trial Balance JSS3 Business Studies Lesson Note

MEANING OF A TRIAL BALANCE

A trial balance is a list of debit and credit balances extracted from the ledger. The trial balance shows the arithmetical accuracy of ledger entries. Double-entry bookkeeping requires that the totals of the debit column and that of the credit column of the trial balance agree. 

Where the two sides of a trial balance do not agree, this suggests the presence of one or more errors in the ledger. However, the agreement of a trial balance does not necessarily mean that the accounts are without error as some errors can occur but would not affect the agreement of a trial balance. 

USES OF A TRIAL BALANCE

1. The trial balance is used to show the arithmetical accuracy of postings made in the ledger.
2. The trial balance shows the summarized form of the balances of accounts in the general ledger at a glance.
3. It helps in the preparation of trading accounts, profit and loss accounts, and balance sheets.

FORMAT OF A TRIAL BALANCE

Lucy Enterprises

Trial Balance As At 31st December, 2002

     Particulars                                    Folio                                 DR                  CR

—————————————————————————————————————–

                                                                                                    N                   N

ILLUSTRATION 1

Prepare a trial balance from the following accounts:

Creditors. N2784, bank overdraft N1980 and Purchases N4764

SOLUTION

TRIAL BALANCE AS AT …………………..

  DR                        CR

   N                            N

Creditors —————————-                                              2784

Bank Overdraft———————–                                              1980

Purchases —————————–                                          4764

                                                                          ——-                          ——–

                                                                  4764                            4764

                                                                  =====                           =====

ILLUSTRATION 2

Prepare a trial balance from the ledger account balances :

Capital   N1,000,  Creditors  N100, Purchases N4764, Sales N5194, 

Stocks    N480,  Debtors  N100 and Cash N950

SOLUTION

                                          TRIAL BALANCE AS AT …

                                                                 DR                   CR                     

                                                                   N                   N

Capital——————————–                                         1000

Creditor————————————–                               100

Sales —————————————                                 5194

Purchases ——————————–                                   4764

Stocks——————————–                  480

Debtors ———————————–            100

Cash in hand —————————–            950

                                                                  ——-                  ——–

                                                                  6294                     6294            

.                                                                =====            =====

EVALUATION

1. State the rules for posting entries into the trial balance 
2. State two uses of a trial balance 

READING ASSIGNMENT   

Business Studies for Junior Secondary Schools, Book 3 by O.A . Lawal et al pages 60-71 

GENERAL REVISION QUESTIONS

1. What is a cash book? 
2. Mention the types of cash books.
3. State the principle of double entry.
4. Draw the format of a ledger.
5. Which type of cash book is similar to the format of a ledger?

WEEKEND ASSIGNMENT

1 All expenses are ———– in the trial balance A.   debited     B.  credited      C.  added      D.  deducted

2       All liabilities and incomes should be ——— A. debited      B  earmarked       C  credited       D  added

3       Which of the following is credited to the trial balance? A  Loan     B  Purchases      C  Wages       D  rent

4        Drawings is ————- in the trial balance A. credited     B.  debited      C  added      D  deducted

5         All liabilities are ———— in the trial balance A  debited      B.  credited       C.  added       D.  deducted

THEORY

1. What is a trial balance?
2. Sketch a format of the trial balance with at least seven entries on the credit side and fifteen entries on the debit side.