Trial Balance PDF

Financial and Management Accounting Unit 6
Unit 6 Trial Balance
Structure
6.1 Introduction
Objectives
6.2 Meaning
Self Assessment Questions 1
6.3 Objectives
6.4 Methods of preparing trial balance: Total Method and Balance Method
6.5 Preparation op Trial balance
6.6 Errors and their rectification
6.7 Errors disclosed by a Trial Balance
6.8 Errors not disclosed by Trial Balance
6.9 Steps to locate the errors
6.10 Trial Balance and adjustments
Terminal Questions
Answer to SAQs and TQs
6.1 Introduction
Journal and ledger are the books containing the details of business transactions which have
taken place during a particular period. The purpose of these records is preparation of final
accounts – trading account, profit and loss account and balance sheet. Before attempting to
prepare final accounts, a summary of the transactions, as depicted by ledger should be available
in a form that is easy to classify the assets, liabilities, expenses and incomes. While expenses
and incomes are used to prepare trading and profit and loss accounts, assets and liabilities are
presented in the balance sheet. Trial Balance stands as a bridge between primary and secondary
books on one hand and final statements of accounts on the other hand.
Sikkim Manipal University 86
Learning Objectives:
After studying this unit, you should be able to understand the following
1. To know the meaning and format of trial balance.
2. To understand the objectives of preparing a trial balance
3. To know the guidelines to prepare a trial balance.
4. To identify and rectify the errors that can be disclosed by trial balance
5. To identify and rectify the errors that can not be disclosed by trial balance
6. To know the steps to locate the errors.
7. To prepare trial balance after incorporating adjustments.
6.2 Meaning
Trial Balance is a statement containing the various ledger balances on a particular date. It is used
to verify the equality of debits and credits in the ledger. When the total of debit balances equals
the total of credit balances, the ledger is said to be in balance. A trial balance is prepared as
follows:
TRIAL BALANCE AS ON 31 ST MARCH,
Debit Credit
Particulars
Rs. Rs.
Cash account 1,20,000
Capital account 1,00,000
Purchases account 40,000
Mohan account (creditor) 20,000
Sales account 40,000
Total 1,60,000 1,60,000
1. The purpose of preparing journal and ledger accounts is to prepare __________.
2. The final accounts include _________, ____________ and ________.
3. Trial balance is regarded as a bridge between primary and secondary books and
preparation of final accounts (True / False ).
4. Trial balance contains debit balances and credit balances. (True / False )
5. If trial balance tallies, balance sheet also tallies. (True / false )
6.3 Objectives
There are three objectives of preparing a trial balance.
a) To check the arithmetic accuracy of entries made. In double entry, every debit has an
equivalent credit. Even in General Journal, we have seen that the total of debits equals the
total of credits. Similarly, if the debits and credits tally in a trial balance, it indicates that the
books of account are arithmetically accurate. If the two sides do not tally, it is sure that errors
have crept in.
b) Basis for financial statements. As stated earlier, trial balance is a bridge between ledger and
final statements. It is only through trial balance, trading account, profit and loss account and
balance sheet are prepared. If trial balance tallies, it means that the final statements should
invariably tally.
c) It is a summarised ledger. The position of a ledger account be judged simply by looking at the
trial balance. It is because, all ledger accounts, after being balanced, are grouped as those
showing debit and those showing credit balances. They must be equal in value.
1. Trial balance checks the arithmetic accuracy of debits and credits ( True / False)
2. Trial balance is a summary of ledger accounts. So, if ledger accounts are properly prepared
and balanced, trial balance tallies ( True / False).
6.4 Methods of preparing Trial Balance
Totals method and Balance method are the two techniques of preparing trial balance. In the first
method, the totals of debits and credits of every account are shown in the trial balance. For
instance, a cash account shows Rs.45000 as debit total (Receipts) and Rs35000 as credit total
(Payments). Both these totals are carried to trial balance. The same logic is applied for all other
accounts. Then also the trial balance tallies In the second method, instead of transferring the
totals of both debit and credit, the net balance Rs.10000 (45000 – 35000) is shown on the debit
side of trial balance. Same principle is adopted for all other accounts. The trial balance tallies. In
the former method, more details can be understood but it is cumbersome. The second method
gives the gist of the account and second method is popular.
1. Trial Balance is prepared either under total method or balance method ( True / False).
2. Which method is popular ?
3. What ever be the method of preparing trial balance, debit total should be equal to total of
credit (True / False ).
6.5 Preparation of Trial Balance
A trial balance can be prepared just as an account having debit side and credit side. It can also
be prepared by enlisting all ledger accounts one below the other and showing their respective
debit or credit balances on separate columns. Both methods are equally prevalent.
However, the following steps should be followed to prepare a Trial Balance.
a) Prepare the ledger accounts
b) Balance them at the end of accounting period
c) Group all accounts showing debit balance and show them of left hand side of trial balance
d) Group all those accounts showing credit balance and show them on the right hand side of trial
balance.
e) Total the debits and credits and they must be equal, what ever be the method of preparing the
trial balance.
1. How do you prepare trial balance ?
2. If total of debits and credits do not tally, do you suspect any errors ?
Illustration:
The following are the ledger accounts of Mr. X as on 31 st December, 1998. Prepare a trial
balance.
Dr. Cash Account Cr.
Amount Amount
Date Particulars Date Particulars
Rs. Rs.
1404 To balance b/d 50,000 6404 By Cash 5,000
24—04 To Sales 45,000 10404 By Kumar 29,000
16404 To Mohan 35,000 14404 By Purchases 50,000
26404 To Sales 10,000 18404 By creditors 20,000
20404 By Furniture 5,000
22404 By Wages 500
By Printing 1,000
By Comm 2,000
30404 By Electricity 500
By Telephone 1,000
By salaries 4,000
By balance c/d 22,000
1,40,000 1,40,000
1504 To balance b/d 22,000
Building Account
Amount Amount
Rs. Rs.
1404 To balance b/d 2,00,000 30404 By balance c/d 2,00,000
1504 To balance b/d 2,00,000
Furniture Account
Date Particulars Amount Date Particulars Amount
Rs. Rs.
20404 To Cash 5,000 30404 By balance c/d 15,000
15,000 15,000
Bank Fixed Deposit Account
Amount Amount
Rs. Rs.
1404 To balance b/d 1,00,000
12404 To Interest 7,000 30404 By balance c/d 1,07,000
1,07,000 1,07,000
1504 To balance b/d 1,07,000
Stock Account
Amount Amount
Rs. Rs.
1404 To balance b/d 25,000 30404 By balance c/d 25,000
Creditor’s Account
Amount Amount
Rs. Rs.
18404 To Cash 20,000 1404 By balance b/d 35,000
30404 To balance c/d 15,000
35,000 35,000
1504 By balance b/d 15,000
Capital Account
Amount Amount
Rs. Rs.
30404 To balance c/d 3,50,000 1404 By balance b/d 3,50,000
35,000 3,50,000
1504 By balance b/d 3,50,000
Purchases Account
Amount Amount
Rs, Rs.
4404 To Kumar 30,000 30404 By balance c/d 95,000
14404 To Cash 50,000
To Sarin 15,000
95,000 95,000
Sales Account
Amount Amount
Rs. Rs.
30404 To balance c/d 95,000 2404 By Cash 45,000
8404 By Mohan 40,000
26404 By Cash 10,000
95,000 95,000
Kumar Account
Amount Amount
Rs. Rs.
10404 To Cash 29,000 4404 By Purchases 30,000
To discount 1,000
30,000 30,000
Repairs Account
Amount Amount
Rs. Rs.
5,000 5,000
Mohan Account
Amount Amount
Rs. Rs.
8404 To sales 40,000 16404 By Cash 35,000
30404 By balance c/d 5,000
40,000 40,000
Discount Received Account
Amount Amount
Rs. Rs.
30404 To balance c/d 1,000 10404 By Kumar 1,000
1,000 1,000
Interest on Fixed Deposit Account
Amount Amount
Rs. Rs.
30404 To balance c/d 7,000 12404 By Bank FD 7,000
7,000 7,000
Wages Account
Amount Amount
Rs. Rs.
22404 To Cash 500 30404 By balance c/d 500
500 500
1504 To balance b/d 500
Printing Account
Rs. Rs.
1,000 1,000
Commission Account
Amount Amount
Rs. Rs.
2,000 2,000
Electricity Account
Rs. Rs.
30404 To Cash 500 30404 By balance c/d 500
500 500
Telephone Account
Amount Amount
Rs. Rs.
1,000 1,000
Salaries Account
Amount Amount
Rs. Rs.
4,000 4,000
Sarin’s Account
Amount Amount
Rs. Rs.
30404 To balance c/d 15,000 28404 By Purchases 15,000
15,000 15,000
Solution
TRIAL BALANCE AS ON 30 TH APRIL, 2004
Debit balances Amount Rs. Credit balances Amount
Rs.
Cash 22,000 Creditors 15,000
Building 2,00,000 Capital 3,50,000
Furniture 15,000 Sales 95,000
Bank FD 1,07,000 Discount received 1,000
Stock 25,000 Interest on FD 7,000
Purchases 95,000 Sarin 15,000
Repairs 5,000
Mohan 5,000
Wages 500
Printing 1,000
Commission 2,000
Salaries 4,000
Telephone 1,000
Electricity 500
Total 4,83,000 Total 4,83,000
6.6 Errors and their rectification
An error is unintentionally committed mistake. Trial Balance, if does not tally, is a clear indication
that there are some errors committed. The errors may be committed at various stages –
journalizing, posting, casting (totaling), balancing, transferring to trial balance and so on. Mere
tallying the trial balance does not ensure error free statement. For example, if a transaction is
completely omitted, the trial balance still tallies. But there is inherent error. Errors whether
disclosed or not disclosed by trial balance, have to be corrected or rectified in order to obtain the
correct picture of profit or loss. It should be remembered that errors will have their impact not only
on profit but also on the asset and liability position of the business organization.
1. Errors can be committed at all stages, commencing from journalizing, posting, costing,
balancing, transferring the closing balances, etc. (True / False).
2. Errors of omission, error of principle and compensating errors are not disclosed by trial
balance (True / False).
3. Errors of costing, posting to wrong side of an account, wrong amount etc can be detected by
trial balance (True / False).
6.7 Errors disclosed by Trial Balance
Those errors that can be disclosed by trial balance can easily be located. As soon as the trial
balance does not tally, the accountant can proceed to find out the spots where the errors might
have been committed. The total amount of difference in the trial balance is temporarily transferred
to a ‘Suspense Account’ so that it can be mitigated as and when the errors get rectified.
Therefore the suspense account gets debited or credited as the case may be for rectification of
this type of errors. The following are the errors which are disclosed by trial balance:
a) Posting a wrong amount: While posting an entry from subsidiary book to ledger,
b) this mistake may happen. For example, Cash received from Rama Rs1150 is posted to
Rama’s ledger account as Rs.1500, while it is correctly recorded in cash account. As a result
of this error, trial balance does not tally. To rectify this Rama’s account should be debited by
Rs350 (1500 – 1150) and credit should be given to suspense account.
c) Posting to the wrong side of an account: This error is committed while posting entries from
subsidiary books to ledger. For instance, Sales made to Krishna Rs5000 is transferred to
credit side of Krishna’s account in the ledger. This error can be rectified by debiting Krishna’s
account by Rs1000 and crediting suspense account. Note that the amount debited is double
the actual amount.
d) Wrong totaling: Both under casting and over casting are detected by trial balance. If any
account is wrongly totaled, it gets reflected in the trial balance. To illustrate, purchases book
total is Rs.5800. If it totaled as Rs.5700 or 5900, the difference will be shown in the trial
balance. To rectify this, first find out what is the normal balance shown by the account
wrongly totaled. If it is debit balance and it is under cast, the same account can be debited
and credit is given to suspense account. If it is over cast, the respective account should be
credited by the amount of difference and debit is given to suspense account. It is quite
opposite in case the respective account is one which normally shows credit balance.
e) Omitting to post an entry from subsidiary book to ledger: If an entry made in the
subsidiary book does not get posted to ledger, the trial balance does not tally. For instance,
rent paid Rs2000 recorded in cash account but is not posted to rent account at all. To rectify
such error, the respective account should be debited or credited as the case may be and
suspense account is credited or debited as the case may be.
f) Omission of an account altogether from being shown in trial balance: For instance,
advertisement account which shows a debit balance is completely omitted from trial balance.
This can be rectified by bringing it to trial balance and suspense account can be credited and
advertisement account is debited.
g) Posting an amount to a correct account more than once: This results in imbalance in the
trial balance. The concerned account which is posted twice should be cancelled and
suspense account to be suitably debited or credited as the case may be.
h) Posting an item to the same side of two different ledger accounts: If two accounts are
debited /credited for the same transaction, this type of error occurs. For example, Furniture
purchased should be debited to furniture account only. If it is posted to furniture account and
purchases account, then the difference arises in the trial balance. To rectify this, the ledger
account to which it is debited wrongly should be credited and suitably suspense account is
debited.
1. Suspense account is the difference between debit total and credit total of a trial balance.
( True / false ).
2. Suspense account is created temporarily and later, it is removed as and when errors are
detected and suitable rectified ( True / False ).
3. if amount paid to Rama Rs 500 is credited to Ramanan accounts, what rectification entry
should be made ?
4. Instead of putting Rs. 1500 to debit of wages account, Rs 15000 is recorded. What impact, it
has an profit ?
5. How do you rectify the above error ?
6. Telephone expenses of Rs 2500 is entered in cost account but not posted to ledger. How do
your rectify ?
7. Rs. 2116 interest paid an loan is posted to interest accounts once as Rs 2611 and second
time as Rs. 2161. How do you rectify?
6.8 Errors not disclosed by Trial Balance
There are four errors regarded as those which do not affect trial balance and it is difficult to locate
them. A brief description of the four errors is offered in the following paragraphs:
a) Error of omission: Error of omission occurs when a transaction is completely omitted from
the books of accounts. If purchase of goods from Jairam on credit is not recorded at all either
in the general journal or in the purchases book, it is termed as error of omission. Since both
aspects – debit and credit – of the transaction are missing, the trial balance is not affected at
all. To rectify such errors, the transaction should be recorded when it is traced.
b) Error of commission: If the error of wrong posting, wrong casting, wrong calculation etc.,
committed in the books of original entry or ledger, it is said to be error commission. For
instance, purchase invoice of Rs.1730 may have been entered as Rs.1370 in the purchases
book itself, then in the subsequent ledger accounts, the same mistake continues and thereby
can not be disclosed by trial balance. The difference of Rs.360 (17301370) should be added
to purchases account and to the respective supplier’s account. The error can be detected only
when the original invoice is referred to after getting the complaint from the supplier. In the
above example, purchases account is debited and the concerned supplier’s account is
credited to rectify the error. Such errors have repercussion on the profit or loss of the
organization. From the above example, additional purchases will have to be incorporated and
to that extent the expenses will be increased or profit will be affected.
c) Error of principle: While drawing journal entries, often error of principle is committed and this
goes un noticed because it does not affect the total of trial balance. For instance, ‘wages’ paid
to workers engaged in the construction of building of the organization, constitutes part of the
cost of the building. So the wages paid should be debited to building account but not wages
account. If the building account is debited, the value of the asset appears in the balance sheet
and the expenditure is actually capitalized. In case the wages are treated as usual revenue
expenditure, they are deducted from profit. The error here is wages account is debited and
not building account. Therefore to rectify this, building account should be debited and wages
account should be credited to erase. Similarly, treating incomes as liabilities, providing
insufficient provision for bad and doubtful debts, inadequate depreciation against assets etc.,
come under errors of principle. They must be rectified by applying the correct principles of
accountancy.
d) Compensating errors: It is also called offsetting error. Compensating error is one which is
counter balanced by another error. If the account of Mr. X is to be debited for Rs1000, but it is
debited for Rs100 while the account of Mrs X account is to be debited Rs.100 but it is debited
by Rs.1000, the first error is compensated by the second error and therefore the trial balance
is not affected. This comes to light only at a later stage. To rectify the error, Mr. X account
should be debited by Rs.900 where as Mrs. X account should be credited by Rs.900.
1. If error of wrong posting, wrong costing, wrong calculation are committed in the books of
original entry or secondary books, such errors are called ________.
2. Error of commission affects trial balance (True / False).
3. Furniture purchased for cash Rs 5000/ is to recorded in journal. What type of error is this ?
4. Error of omission can be detected only after a careful review of ledger balances of previous
years (True / False).
5. Error of principle affects the value of revenue and capital items (True / False).
6. It is very difficult to find out the compensating errors. (True / False).
6.9 Steps to locate the Errors
The following steps help to locate the errors. In spite of the efforts, if the difference in the trial
balance persists, a suspense account may be created and subsequently the suspense account
can be eliminated as and when the errors are located and rectification is made.
i) Check both sides of the trial balance to ensure that mistake of totaling is not there.
ii) Check the totals of debtors and creditors accounts
iii) Find out whether all ledger balances are carried to trial balance
iv) Verify the totals of all ledger accounts
v) Divide the amount of difference in the trial balance by 2 and see if any item of the debit or
credit side, equal to that amount has been posted to the opposite side.
vi) Check whether the opening balances are brought down correctly from the previous
accounting period
vii) Make a comparison with trial balance of the previous year to find out if there are any items
missing.
viii) Where the difference in the trial balance is divisible by 9 then the difference is likely to be
due to misplacement of figures like 12 for 21; 24 for 42;36 for 63 and so on.
6.10 Trial Balance and adjustments
When errors are located, they should be rectified. It is not a good practice nor does it have any
legal sanction to erase the mistakes and re write the correct ones. Rectification entries are
recorded in General journal or journal proper. The following illustrations are given to show how to
rectify the different types of errors.
Self Assessment Questions 8:
1. Summary of all ledger balances is called ______________________ .
2. Trial balance is necessary to prepare _________________________ .
3. The broad two categories of errors are a)________________ b) ____________.
4. Is casting error of principle or error of commission?
5. Purchase of machinery is included in the purchases book. What type of error is it?
6. What is error of omission? Illustrate.
7. What are the errors that can not be disclosed by trial balance?
8. The sum of errors in accounting is transferred temporarily to _________ account.
9. In which journal do you make rectification entries?
10. State any four steps to locate errors.
11. If sales account is under cast by Rs.45, what is the rectification entry?
12. Returns inwards book is over cast by Rs9, write rectification entry.
13. salary paid to Gopal is debited to his personal account. What is the rectification entry to
correct the error?
14. Discount received Rs50 is transferred to the debit side of discount account. Write the
rectification entry.
15. An invoice of purchase for Rs.760 is entered as Rs.670. What type of error is this? How to
rectify this error?
Illustration 1
An accountant finds that the trial balance of his client did not tally and it showed an excess credit
of Rs.69.74. He transferred it to a suspense account and later discovered the following errors.
a) Rs.44.37 paid to Anand has been credited to his account as Rs34.37.
b) A purchase of Rs.145.50 has been posted as Rs154.50 to the purchases account
c) An expenditure of Rs.158 on repairs has been debited to the Buildings account
d) Rs.80 was allowed by B as discount which has not been entered in the books.
e) A sum of Rs.125.05 realized on the sale of old furniture has been posted to the sales account.
Give journal entries to rectify the errors and show the suspense account as it would appear after
adjustments.
Solution
Date Particulars LF Debit (Rs.) Credit (Rs.)
1 Anand’s account Dr 78.74
To suspense account 78.74
(Being wrong amount, wrong
ly credited to Anand’s a/c
rectified)
2 Suspense account Dr 9.00
To Purchases account 9.00
(Being over debit of
purchase account rectified)
Repairs account Dr
3 158.00
To Buildings account
158.00
(Being wrong debit given to
building account rectified)
80.00
B’s account Dr
4 80.00
To Discount received a/c
(Being discount received
from B, omitted earlier,
brought to account)
Sales account Dr 125.05
5. To old furniture account 125.05
(Being sale of old furniture
wrongly transferred to sales
account rectified)
Suspense Account
Amount Amount
Rs. Rs.
To Difference in trial balance 69.74 By Anand’s a/c 78.74
To Purchases a/c 9.00
78.74 78.74
Note:
1. The excess of credit balance of trial balance means that the total of credit is more than debit
by Rs69.74 and so the difference is shown on the debit side of suspense account.
2. When amount is paid to Anand, his account should have been debited. On the other hand, his
account was credited and that too with a wrong figures. To rectify this double error, Anand’s
account has to be debited with Rs.78.74 (Rs.44.37 + 34.37) and the suspense account is
credited.
3. Purchases account was over debited by Rs9 and so Purchases account is credited to nullify
the effect and suspense account is debited.
4. Repairs spent on building are, by mistake, debited to buildings account. This is error of
principle. So repairs account is debited and buildings account is credited to rectify the
mistake.
5. Discount received from B has not been taken to records. This is an error of omission.
Therefore, it is now brought to accounts. This has not affected the trial balance.
6. When old furniture is sold, the furniture account should have been credited. On the other
hand, sales account was credited against to the principle of accounting. To rectify the error,
sales account is debited and old furniture account is credited.
Illustration 2
The trial balance of Evergreen Co Ltd., taken out as on 31 st December, 2002 did not tally and the
difference was carried to suspense account. The following errors were detected subsequently.
a) Sales book total for November was under cast by Rs1200.
b) Purchase of new equipment costing Rs.9475 has been posted to Purchases A/c.
c) Discount received Rs1250 and discount allowed Rs850 in September 2002 have been posted
to wrong sides of discount account
d) A cheque received from Mr Longford for Rs.1500 for goods sold to him on credit earlier,
though entered correctly in the cash book has been posted in his account as Rs.1050
e) Stocks worth Rs.255 taken for use of Mr Dayananda, the Managing Director, has been
entered in sales day book.
f) While carrying forward, the total in Returns Inwards Book has been taken as Rs.674 instead
of Rs.647.
g) An amount paid to cashier, Mr. Ramachandra, Rs.775 as salary for November month has
been debited to his personal account as Rs757.
Pass journal entries and draw up the suspense account.
Solution
Journal Proper of Evergreen Co Ltd.,
Date Particulars L F Debit Credit
Rs. Rs.
31122002 Suspense account Dr 1,200
To Sales account 1,200
(Being under casting of sales book rectified)
31122002 New Equipment account Dr 9,475
To Purchases account 9,475
(Being wrong debit given to purchases account rectified)
31122002 Discount allowed account Dr 1,700
Suspense account Dr 800
To Discount received a/c 2,500
(Being discount received and discount allowed posted to
wrong sides of discount account rectified)
31122002 Suspense account Dr 450
To Longford account 450
(Being short credit given to Longford rectified)
31122002 Sales account Dr 255
To suspense account 255
(Being stock used for personal purpose wrongly credited
to sales account rectified)
31122002 Suspense account Dr 27
To Returns Inwards account 27
(Being excess debit given to returns inwards account to
the extent of Rs27, now rectified)
31122002 Salary account Dr 775
To Ramachandra ‘s a/c 757
To Suspense a/c 18
(Being the wrong debit of salary to the personal account
of Ramachandra now rectified)
Dr SUSPENSE ACCOUNT Cr
Amount Amount
Particulars Particulars
Rs. Rs.
To sales account 1,200 By Sales 255
To Discount received a/c 800 By Salary 18
To Longford 450 By balance c/d 2,204
To Returns Inwards a/c 27
Total 2,477 Total 2,477
Terminal Questions
1. Prepare a trial balance from the following
Amount Amount
Particulars Particulars
Rs. Rs.
Purchases 8,225 Premium on lease 1,200
Wages 1,025 Loan on mortgage 2,500
Sales 12,450 Plant and machinery 2,000
Arun’s capital 13,500 Provision for doubtful debts 300
Stock on 1198 1,500 Sundry debtors 16,550

Salary 410 Trade charges 200
Rent and taxes 162 Bad debts 200
Sundry creditors 2,572
(Ans: Rs .31322).
2. The following Trial balance was extracted from the books Chetan, a small businessman. Do
you think that it is correct? If not, rewrite it in the correct form.
Debits Rs. Credits Rs.

Stock 8250 Capital 10000
Purchases 12750 Sales 15900
Returns outwards 700 Returns inwards 1590
Discount received 800 Discount allowed 800
Wages and salaries 2500 Scooty 1750
Rent and rates 1850 Carriage charges 700
Sundry debtors 7600 Sundry Creditors 7250
Bank Overdraft 2450 Bills payable 690
(Ans: Rs. 37,790).
3. Mr. Abhijit was unable to tally Trial balance last year and wrote off the difference to the
Suspense account. He appointed a chartered accountant who examined the old books and
found the following mistakes.
a) Purchase of a cycle was debited to conveyance account Rs.3000
b) Purchase account was over cast by Rs.10000
c) A credit purchase of goods from Padam for Rs4000 was entered as sale.
d) Receipt of cash from Allum was posted to the account of Arun Rs.3000
e) Receipt of cash from Cherag was posted to the debit side of his account Rs.6000
f) Rs.1000 due by Mr. Zavahir was omitted to be taken to trial balance.
g) Sales of goods to Mr. Rajaram for Rs6000 was omitted to be recorded.
h) Payment of Rs.5050 for purchase was wrongly posted as Rs.5500 in purchases account..
Suggest the necessary rectification entries. Prepare suspense account.
Answer for Self Assessment Questions
1. Final Accounts
2. Trading A/c, P & L A/c, Balance sheet.
3. True
4. True
5. False
1. True
2. True
1. True
2. Balance method
3. True
1. Group all ledger accounts showing debit balance and group all accounts showing credit
balance. summaries them total of debit is equal to total of credit.
2. Yes
1. True
2. True
3. True
1. True
2. True
3. Rama account should be Debited by Rs 500, Ramanan’s account should be debited by Rs
500 and credit should be given suspense account Rs 1000.
4. Profit – (gross ) is Reduced by Rs 13500.
5. Wages account is credited by Rs 13500 and debit is given to suspense A/c.
6. Telephone expenses account is debited and suspense account is credited
7. Total amount debited to interest account is Rs 2611 + 2161 = 4772.
The correct amount by crediting interest account and debiting suspense account with similar
amount.
1. Error of commission
2. False
3. Error of omission
4. True
5. True
6. True
1. Trial balance.
2. final accounts
3. Error that are disclosed by trial balance and those which cannot be disclosed by trial
balance.
4. Error of commission.
5. Error of principle.
6. Omitting completely a transaction from books of original entry. Sales made to Raghu Rs
120 completely ignored.
7. Error of omission, commission, principle, compendating error.
8. suspense account.
9. Journal proper
10. check the total of both sides of trial balance, total debtors & creditors, verify whether
balancing is done correctly, check the totals of ledger balances etc.
11. suspense account is debited and sales account is credited.
12. suspense a/c is debited and sales returns a/c is credited.
13. Salary a/c is debited and Gopal a/c is credited.
14. Discount a/c is credited by Rs 100 and suspense a/c is debited
15. This is an error of omission. By checking the original invoice document, it can be rectified.
Debit purchases account and credit the creditor’s account.
Terminal Question Answers :
1. Refer to unit 6.5 Ans – Rs 31322
2. Refer to Unit 6.5 Ans – Rs 37790
3. Refer to unit 6.10 Ans Suspense A/c Excess debit over Credit is Rs 5450.

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Financial and Management Accounting Unit 6

Total 1,60,000 1,60,000

Stock on 1198 1,500 Sundry debtors 16,550

Debits Rs. Credits Rs.

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Trial Balance PDF

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Trial Balance PDF

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Financial and Management Accounting Unit 6

Total 1,60,000 1,60,000

Stock on 1­1­98 1,500 Sundry debtors 16,550

Debits Rs. Credits Rs.

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Stock on 1198 1,500 Sundry debtors 16,550