TRIAL BALANCE: MEANING, EXTRACTION OF TRIAL BALANCE FROM LEDGER

Table of Content

• What is a Trial Balance?
• Format Of A Trial Balance
• ILLUSTRATION: Records of Transactions from Abiodun's Day Book
• Explanation on Double Entry Application (Treatment)
• Solution: Preparation of Ledger Accounts for Abiodun's Business
• Trial Balance Of Abiodun

What is a Trial Balance?

A trial balance can be defined as the list of all the credit and the debit balances in the ledger, including the cash book. It is used to test the arithmetical accuracy of the financial transaction.

Since the ledger account is prepared in line with the double entry principle, it is expected that the sum of the debit side of a trial balance should be equal to the sum of the credit side of the trial balance. If the sum of the debit side is not equal to t-+he sum of the credit side, one of the errors that are explained under correction of errors in the trial balance must have occurred.

Format Of A Trial Balance

A Trial Balance is divided into three columns. The first column for description, followed by Debit (Dr) where debit balances from the ledger are posted while the third column is for Credit (Cr) where the credit balances from the ledger are posted

Format of a Jornal or Day Book

Trial Balance Entries

Trial Balance	Dr	Cr
	N	N
Building	xx
Plant and Machinery	xx
Capital		xx
Stock	xx
Purchases	xx
Electricity	xx
Debtors	xx
Creditors		xx
Salaries	xx
Total	xxx	xxx

Full Youtube Video on Ledger Account, Types and Preparation of Ledger Using Double Entry Principle

ILLUSTRATION: Records of Transactions from Abiodun's Day Book

Abiodun started a Boutique business with cash amount of N100,000 on 1st of January, 2021. The following are the other transactions made by the business:

Jan. 3,	Purchased of 5 pairs of Jean at N5,000 per Jean
Jan 8,	Cash sales N10,000.
Jan 10,	Paid electricity in cash N2,000
Jan 14,	Purchased 7 pairs of Jeans at N6,000 per Jean from Johnson on credit.
Jan 17,	Abiodun withdrew N20,000 to pay his house rent.
Jan 19,	Credit sales to Ola N10,000
Jan 23,	Paid cash of N25,000 to Johnson
Jan 25,	Cash sales N15,000
Jan 8,	Cash sales N10,000.
Jan 29,	Received N7,000 cash from Ola

Jan 31, Paid salaries, N12,000 cash. You are required to prepare the ledger account of Abiodun and extract the trial balance for the month of January, 2021.

Explanation

The followings explain how the accounts will be treated in the ledger. That is, the account to be debited (Reciever) and the account to be credited (Giver).

No. 1

Abiodun started a Boutique business with cash amount of N100,000 on 1st of January, 2021. Dr: Cash Account Cr: Capital Account

No. 2

Jan. 3, Purchased of 5 pairs of Jean in cash at N5,000 per Jean Cr: Cash Account Dr: Purchases Account

No. 3

Jan 8, Cash sales N10,000. Dr: Cash Account Cr: Sales Account

No. 4

Jan 10, Paid electricity in cash N2,000 Cr: Cash Account Dr: Electricity Account

No. 5

Jan 14, Purchased 7 pairs of Jeans at N6,000 per Jean from Johnson on credit. Dr: Purchases Account Cr: Johnson’s Account

No. 6

Jan 17, Abiodun withdrew N20,000 to pay his house rent. Cr: Cash Account Dr: Drawings Account

No. 7

Jan 19, Credit sales to Ola N10,000 Dr: Ola’s Account Cr: Sales Account

No. 8

Jan 23, Paid cash of N25,000 to Johnson Cr: Cash Account Dr: Johnson’s Account

No. 9

Jan 25, Cash sales N15,000 Dr: Cash Account Cr: Sales Account

No. 10

Jan 29, Received N7,000 cash from Ola Dr: Cash Account Cr: Ola’s Account

No. 11

Jan 31, Paid salaries, N12,000 cash. Cr: Cash Account Dr: Salaries’ Account

Solution: Preparation of Ledger Accounts for Abiodun’s Business

Ledger One: Cash Account

<d>

Dr	Cash Account				Cr
N					N
01/01	Capital	100,000	03/01	Purchases	25,000
08/01	Sales	10,000	10/01	Electricity	2,000
25/01	Sales	15,000	17/07	Drawings	20,000
29/01	Ola	7,000	23/01	Johnson	25,000
			31/01	Salaries	12,000
				Bal c/d	48,000
		132,000			132,000
	Bal b/d	68,000

Ledger Two: Capital Account

Dr	Cash Account				Cr
N					N
	Bal c/d	100,000	01/01	cash	100,000
		100,000			100,000
				Bal b/d	100,000

Ledger Three: Purchases Account

Dr	Purchases Account				Cr
N					N
03/01	cash	25,000
14/01	Johnson	42,000		Bal c/d	67,000
		67,000			67,000
	Bal b/d	67,000

Ledger Four: Sales Account

Dr	Sales Account				Cr
N					N
08/01	Cash	10,000
09/01	Ola	10,000
25/01	Cash	15,000		Bal c/d	35,000
		35,000			35,000
				Bal b/d	35,000

Ledger Five: Electricity Account

Dr	Electricity Account				Cr
N					N
10/01	cash	2,000		Bal c/d	2,000
		2,000			2,000
	Bal b/d	2,000

Ledger Six: Creditorss Account

Dr	Johnson Account				Cr
N					N
23/01	Cash
14/01	Purchases	42,000
	Bal c/d	17,000
		42,000			42,000
				Bal b/d	17,000

Ledger Seven: Drawings Account

Dr	Drawings Account				Cr
N					N
17/01	cash	20,000		Bal c/d	20,000
		20,000			20,000
	Bal b/d	20,000

Ledger Eight: Debtors' Account

Dr	Ola Account				Cr
N					N
19/01	Sales	10,000	29/01	Cash	7,000
				Bal c/d	3,000
		10,000			10,000
	Bal b/d	3,000

Ledger Nine: Salaries Account

Dr	Salaries Account				Cr
N					N
31/01	cash	12,000		Bal c/d	12,000
		12,000			12,000
	Bal b/d	12,000

Extraction of Trial Balance from the Ledgers

Trial Balance Of Abiodun

Trial Balance Entries

Trial Balance	Dr	Cr
	N	N
Cash	48,000
Capital		100,000
Purchases	67,000
Sales	35,000
Electricity	2,000
Creditors; Johnson		17,000
Drawings	20,000
Debtors; Ola	3,000
Salaries	12,000
Total	152,000	152,000