Double Entry System – Part II

TUTORIAL 7

1. What is a trial balance?

2. What are the key purposes of preparing a trial balance?

3. “A trial balance helps an accountant to identify all the errors and ascertain the
accuracy of the double entry recording process” Do you agree with this
statement? Justify your answer

4. Mr. Perera established a wholesale plumbing supplies company in Sri Lanka on

1st of January 2021 During the first month of its operation, the company engaged
in the following transactions.

a) Mr. Perera invested Rs. 500,000 in cash and a land worth Rs. 152,000 at
the commencement of the business.
b) The company purchased machinery for Rs. 150,000 from Lasitha Furnitures
and 2/3 of the value of machinery was paid at the moment of the purchase
and the rest is not yet paid.
c) The company purchased goods worth Rs. 30,000 from Venura by paying
cash.
d) The business paid Rs.20,000 as insurance premium during the first month.
e) The company purchased goods worth Rs. 50,000 on credit basis from
Naduni
f) The business sold goods worth Rs. 20,000 to Pathum on credit basis
g) The company obtained a bank loan worth Rs. 50,000
h) The business made a cash payment to Naduni of Rs. 30,000
i) The business received a payment of Rs. 15,000 from Pathum Rent
expenses paid by the business summed up to Rs. 12,000
 You are required to,
1. Record the above transactions/events in the ledger and show the balance
brought forward in each account. Prepare the Trial Balance as at 31 st
January 2021.

5. “Praveen Spare Parts” an automobile business started by Mr. Praveen in the

month of April 2021 and the transactions occurred during the month given below.

1st April Praveen commenced the business by making an initial investment of Rs.
300,000 in cash and a building worth Rs. 700,000
3rd April Purchased Furniture & Fittings worth Rs. 40,000 for the office
5th April Purchased goods on credit basis worth Rs. 80,000 from Binari
7th April Praveen introduced an additional capital of Rs. 200,000 to the business
8th April Praveen opened a bank account for the business by depositing Rs.
120,000
9th April Returned goods worth Rs. 10,000 to Binari due to damages
10th April Sold goods worth Rs. 30,000 on cash
12th April Sold goods worth Rs. 20,000 to Rekha on credit basis
14th April Rekha returned goods worth Rs. 5,000
15th April The business incurred a building maintenance expense of Rs. 10,000
16th April The business made a payment of Rs.40,000 to Binari through a cheque
18th April Rekha cleared her outstanding debt balance as of 18th April through a
cheque payment. The business offered a discount of Rs. 2000 to Sithara
for settling the payment in full
20th April The business purchased a motor vehicle worth Rs.150,000 from Shehani
Enterprises
22nd April The business obtained a bank loan worth Rs. 200,000 and deposited the
full amount in the business’s bank account directly
24th April Business paid a monthly salary of Rs. 10,000 per person to its employees
(The business employs 3 workers)
25th April Praveen withdrew Rs.10,000 worth goods from the business for personal
use
27th April The business made a payment of Rs. 50,000 to Shehani Enterprises
through an online bank transfer
28th April The business made a cash payment to Binari worth Rs. 20,000
29th April The business sold goods worth Rs. 20,000 on Cash basis
30th April Paid loan installment Rs. 35,000 and Rs. 15,000 of loan interest is included
in the installment.

You are required to,

1) Record the above transactions/events and balance the ledger accounts
2) Prepare the Trial Balance as at 30th April 2021.