Summarizing (Trial Balance)
(Go through the reference books for details)
What is Trial Balance (Kieso, 6th ed., p. 64)
A Trial Balance is a list of accounts and their balances at a given time. A Trial Balance is prepared at
the end of an accounting period. The accounts are listed in the order in which they appear in the
ledger. Debit balances are listed in the left column and credit balances in the right column. According
to Meigs and Meigs, “The proof of the equality of debit and credit balances of all accounts is called a
Trial Balance.
Purposes of Trial Balance (Kieso, 6th ed., p.)
The primary purpose of a trial balance is to prove that the debits equal the credits after posting. The
sum of the debit account balances in the trial balance should equal the sum of the credit account
balances. Trial Balance is useful in the preparation of Financial Statements also. It is the summarizing
step of accounting cycle.
Errors that can not be detected by Trial Balance (Kieso, 6th ed., p.65, Monir, No. 2.32 )
1. Errors of Omission: If a transaction is omitted completely to record i.e. a transaction is not
journalized then this error cannot be located by Trial Balance. For example, Sales Tk. 50,000 is
not journalized.
2. Errors of Writing: These types of errors are made by clerk in recording transactions. Suppose,
furniture purchase Tk. 5,00,000 is recorded in the journal as Tk. 50,000 in both side.
3. Errors of Principle: If a revenue type transaction is treated, in recording, as capital type then this
error is known as error of principle. Such as, Repairs of Machinery Tk. 500 is recorded in
Machinery A/c Dr Tk. 500 then this error is called error of principle.
4. Compensation Errors: If one error is compensated by one or more errors is called compensation
errors i.e. offsetting errors are made in recording the amount of a transaction. For example,
Supplies value is understated by Tk. 500 and Accounts Receivable is overstated by Tk. 500, then
trial balance will agree and this error cannot be located by trial balance.
5. Errors of Misposting: If a account is transfer from journal to ledger in wrong account in right
side in right amount then this error cannot be located by trial balance i.e. a journal entry is not
posted correctly. Cash received Tk. 25,000 is collected from Mr. X and credited to Mr. Y A/c by
Tk. 25,000 then trial balance will agree and error will not detect by trial balance.
6. Errors of Duplication: If a journal entry is posted twice then this error will not detect by trial
balance.
Page 1 of 4
Preparation of Trial Balance (Kieso, 6th ed., p. )
Problem 1
The accounts in the ledger of Speedy Delivery Service contain the following balance on July
31, 1999.
Account Title Taka Account Title Taka
Accounts receivable 7642 Retained earning 4636
Accounts payable 7396 Gas and Oil expense 758
Cash 13767 Insurance expense 523
Delivery equipment 49360 Notes payable 18057
Common stock 40000 Prepaid insurance 2036
Wages expense 4228 Prepaid Rent 1900
Wages payable 815 Service revenue 8610
Interest Revenue 700
Prepare a trial balance
Solution to Problem-1
Speedy Delivery Service
Trial Balance
July 31, 1999
Account Title Debit Credit
Tk. Tk.
Accounts receivable 7642
Accounts payable 7396
Cash 13767
Delivery equipment 49360
Common stock 40000
Wages expense 4228
Page 2 of 4
Wages payable 815
Retained earning 4636
Gas and Oil expense 758
Insurance expense 523
Notes payable 18057
Prepaid insurance 2036
Prepaid Rent 1900
Service revenue 8610
Interest Revenue 700
Total 80214 80214
Problem 2
The account balances of the Pinewood Service Company on December 31, 2003 is shown
below:
Amount
Taka
Cash 650
Note Payable 5000
Emmy, Capital 3066
Prepaid Insurance 432
Accounts Payable 931
Supplies 1320
Land 1200
Unearned Rent Revenue 1020
Building 5000
Accumulated Depreciation-Building 1,000
Page 3 of 4
Equipment 13000
Accumulated Depreciation-Equipment 5200
Emmy, Drawing 3100
Rent Revenue 16196
Salaries Expense 7060
Interest Expense 350
Miscellaneous Expenses 301
Prepare a Trial Balance
Problem 3
The following are the balances of Pioneer Advertising Agency on October 31, 1999. Prepare
a Trial Balance
Accounts Title Taka
Cash 15200
C.R. Buyer, Capital 10000
Rent Expense 900
Advertising supplies 2500
Notes Payable 5000
Prepaid Insurance 600
Fees Earned 10000
Accounts Payable 2500
Office Equipment 5000
Salaries Expense 4000
Unearned Fees 1200
C.R. Buyer, Drawing 500
Page 4 of 4
Problem 4
The following list of accounts and their balances are given for preparing a Trial Balance of
Tammy’s Equipment Rentals at December 31, 2003, the end of the annual accounting period.
Accounts Title Taka
Emmy, Capital 30660
Rent Revenue 161960
Cash 6500
Unearned Rent Revenue 10200
Prepaid Insurance 4320
Supplies 13200
Accounts Payable 9310
Building 50000
Equipment 130000
Accumulated Depreciation-Building 10000
Land 12000
Accumulated Depreciation-Equipment 52000
Emmy, Drawing 31000
Interest Expense 3500
Note Payable 50000
Salaries Expense 70600
Miscellaneous Expenses 3010
Page 5 of 4
Problem 5
December 31, 2001, the following balances are available of Farheen International Inc.
Prepare a Trial Balance.
Account Heading Tk.
Capital 20930
Cash 2425
Accounts Receivable 5,000
Accounts payable 925
Unearned fees 1250
Supplies 1870
Prepaid Insurance 620
Office Equipment 32650
Accumulated depreciation 9700
Drawing 10200
Fees earned 39125
Wage expenses` 12415
Rent expenses 3600
Utilities expenses 2715
Page 6 of 4
