INFORMATION SHEET 3.1.

1
Learning Outcome 1:

LIST ACCOUNT TITLES AND TRANSFER BALANCES FROM THE

LEDGER

Learning Objectives:

After reading this Information Sheet, the trainee must be able to:

1. List Account Titles

2. Transfer Balances from the Ledger
Introduction:

A Trial Balance is a device

used to periodically test the equality
of debits and credits as recorded in
the ledger accounts. It is the transfer
of the ledger account’s open
balances to another accounting form
in order to check the accuracy of the
debit and credit totals.

Methods of Preparation of Trial

Balance

A Trial Balance can be prepared by

the following methods:

1. Total Method – Under this

method, trial balance is prepared by
taking up the total of debits and
credits of all ledger accounts.

2. Balance Method – Under this method, only the balances of all the ledger
accounts are taken up to prepare the trial balance.

Importance of Trial Balance

The Trial Balance is important due to the following reasons:

1. Trial balance summarizes all the financial transactions of the business.

2. Trial balance provides a check on the arithmetical accuracy of
recordings of all the financial transaction of the business.
3. Trial balance helps in locating errors by providing a starting point for
the location of errors committed if any.
4. A trial balance checks that the double entry system is working correctly
and allows the preparation of final accounts.

Steps in Preparing Trial Balance:

1. Write the heading at the top. The heading shows the name of the business
on the first line, Trial Balance on the second line and the date or month and
year the trial balance is being prepared on the third line.
2. Every ledger accounts must be balanced. Balancing is the difference between
the sum of all the debit entries and the sum of all the credit entries.

3. After balancing, accounts are listed in the accounting equation order with
assets listed first followed by liabilities and finally equity.

4. Fill out the account name and the balance of such account in the
appropriate debit or credit column.

1. LIST ACCOUNT TITLES

The Ledger of Solano Enterprises shows the following:

ACCOUNT TITLE : CASH

ACCOUNT CODE : 101

DATE REF PARTICULARS DEBIT CREDIT BALANCE

3-Dec GJ1 Initial capital 400,000.00 400,000.00
7-Dec GJ2 Cash Sales 30,000.00 430,000.00
15-Dec GJ3 Purchase of Office 10,000.00 420,000.00
Supplies
24-Dec GJ5 Collection of Accounts 45,000.00 465,000.00
Receivable
25-Dec GJ6 Payment of Salaries 68,000.00 397,000.00
Expense
30-Dec GJ8 Payment of A/P 20,000.00 377,000.00
31-Dec GJ9 Partial Payment on 125,000.00 252,000.00
Purchase of Service
Vehicle
31-Dec GJ1 Temporary withdrawal 10,000.00 242,000.00
0
ACCOUNT TITLE : ACCOUNTS RECEIVABLE
ACCOUNT CODE : 102

DATE REF PARTICULARS DEBIT CREDIT BALANCE

9-Dec GJ4 Sales on Account 80,000.00 80,000.00
24- GJ5 Collection of Accounts 45,000.00 35,000.00
Dec Receivable
25- GJ7 Sales on Account 75,000.00 110,000.00
Dec
ACCOUNT TITLE : OFFICE SUPPLIES
ACCOUNT CODE : 105

DATE REF PARTICULARS DEBIT CREDIT BALANCE

15- GJ3 Purchase of Office 10,000.00 10,000.00
Dec Supplies

ACCOUNT TITLE : SERVICE VEHICLE

ACCOUNT CODE : 118

DATE REF PARTICULARS DEBIT CREDIT BALANCE

31- GJ9 Purchase of Service 250,000.00 250,000.00
Dec Vehicle on account

ACCOUNT TITLE : ACCOUNTS PAYABLE

ACCOUNT CODE : 308

DATE REF PARTICULARS DEBIT CREDIT BALANCE

31- GJ8 Payment of Accounts 20,000.00 20,000.00
Dec Payable
31- GJ9 Purchase of Service 125,000.00 105,000.00
Dec Vehicle on account

ACCOUNT TITLE : SOLANO ENTERPRISES, CAPITAL

ACCOUNT CODE : 401

DATE REF PARTICULARS DEBIT CREDIT BALANCE

3-Dec GJ1 Initial capital 400,000.00 400,000.00

ACCOUNT TITLE : SOLANO ENTERPRISES, DRAWINGS

ACCOUNT CODE : 403

DATE REF PARTICULARS DEBIT CREDIT BALANCE

31- GJ10 Temporary withdrawal 10,000.00 10,000.00
Dec

ACCOUNT TITLE : SALES REVENUE

ACCOUNT CODE : 404
DATE REF PARTICULARS DEBIT CREDIT BALANCE
7-Dec GJ2 Cash Sales 30,000.00 30,000.00
9-Dec GJ4 Sales on account 80,000.00 110,000.00
25- GJ7 Sales on account 75,000.00 185,000.00
Dec

ACCOUNT TITLE : SALARIES EXPENSE

ACCOUNT CODE : 513

DATE REF PARTICULARS DEBIT CREDIT BALANCE

25- GJ6 Payment of salaries 68,000.00 68,000.00
Dec expense

Below is the list of account titles based from Solano Enterprises ledger:

Account Titles;

Cash

Accounts Receivable

Office Supplies

Service Vehicle

Accounts Payable

Solano Enterprises, Capital

Solano Enterprises, Drawings

Sales Revenue

Salaries Expense

2. TRANSFER BALANCES FROM THE LEDGER

SOLANO ENTERPRISE
TRIAL BALANCE
DECEMBER 31, 2019
ACCT CODES ACCOUNT TITLES DEBIT CREDIT

101 Cash 242,000.00

102 Accounts Receivable 110,000.00

105 Office Supplies 10,000.00

118 Service Vehicle 250,000.00

308 Accounts Payable 105,000.00

401 Solano Enterprises, Capital 400,000.00

403 Solano Enterprises, Drawings 10,000.00

404 Sales Revenue 185,000.00

513 Salaries Expense 68,000.00

 INFORMATION SHEET 3.2.1

SUMMARIZE TRIAL BALANCE

Learning Objectives:

After reading this Information Sheet, the trainee must be able to:

1. Total debit and credit columns with 100% accuracy.

2. Check the total debit and credit columns and should be equal.

After transferring balances from the ledger, Debit and Credit columns are
totaled. Total balance of Debit column should be equal to the total balance of
Credit column.
When amounts are added, the final figure in each column should be
underscored. The totals at the end of the trial balance need to have Peso sign
and double-underscored.

SOLANO ENTERPRISE
TRIAL BALANCE
DECEMBER 31, 2019

ACCT CODES ACCOUNT TITLES DEBIT CREDIT

101 Cash P 242,000.00

102 Accounts Receivable 110,000.00

105 Office Supplies 10,000.00

118 Service Vehicle 250,000.00

308 Accounts Payable 105,000.00

401 Solano Enterprises, Capital 400,000.00

403 Solano Enterprises, Drawings 10,000.00

404 Sales Revenue 185,000.00

513 Salaries Expense 68,000.00

P 690,000.00 P 690,000.00
 ERRORS IN TRIAL BALANCE

The correspondence of trial balance is not stated as definite evidence as

for the absolute accuracy of the books. It only provides an indication of the
mathematical accuracy of the books of accounts. The Trial Balance may agree
and yet there may be some errors of the following types remaining undisclosed.

ERRORS NOT REVEALED BY TRIAL BALANCE:

 Errors of Omission – when a transaction has been completely omitted

from the books.
Ex: Goods sold for cash to Reyes not recorded in original book,
Understatement of debit side for Cash account and credit side
for Sales account, thus no effect on trial balance.

 Errors of Commission – When a wrong amount is being posted on both

sides.
Ex: Purchased of equipment amounting P 169,000.00 was
recorded on both sides for 196,000.00.

 Errors of Principle – An error occurred when an item of one account is

posted to another principle account.
Ex: Machinery purchased amounting P 100,000.00 is posted to
Purchase Account.

 Compensating Errors – An error on the debit side is compensated by an

error of equal amount on the credit side.
Ex: When purchase account amounting P 1,000.00 is posted on
credit side and Sales account also amounting P1,000.00 is
posted on debit side.

 Errors of Complete Reversal – When recording a transaction, the debit

entry and the credit entry are reversed.
Ex: Purchased of Equipment on account is posted as debit on
Accounts payable account and credit on Equipment account.
ERROR REVEALED BY TRIAL BALANCE

There are following errors that are disclosed due to disagreement of trial
balance:

 Omission to post an amount into ledger – If an item is not posted from

journal or subsidiary book.
Ex: If goods purchased on account from Reyes recorded properly in
Reyes book but not recorded in Purchase book.

 Omission to post an amount in trial balance – If a balance of an

account is not recorded in trial balance.
Ex: A balance of Salaries expense account is not forwarded to trial
balance

 Posting of wrong amount – If wrong amount is posted in one of the two

accounts.
Ex: Supplies purchased amounting P 969.00 is posted at P 669.00.

 Posting on the wrong side – When an item is posted in wrong side in

ledger or trial balance.
Ex: Discount allowed to customer of P 1,000.00 is credited to Sales
discount account.

LOCATING ERRORS

Hints for locating errors in balancing Trial Balance

1. A difference of P.01, .10, P1.00, P10.00, P100.00 suggests that an error has
been made in addition, subtraction.

2. A difference of P9.00 or a multiple of P9.00 indicates transposition, meaning

the order of figures is reversed. Ex: P29.00 is written as P92.00.

3. A difference divisible by P2.00 indicates an error in posting to the wrong

column of the trial balance.

4. A difference divisible by P9.00 or P99.00 indicates a slide or misplacement of

decimal point.