INTRODUCTION

A trial balance is a list of all the general

ledger accounts (both revenue and
capital) contained in the ledger of a
business. This list will contain the name
of each nominal ledger account and the
value of that nominal ledger balance.
Each nominal ledger account will hold
either a debit balance or a
credit balance.
 CASH ACCOUNT (LEDGER)
DATE PARTICULARS JF AMOUNT DATE PARTICULARS JF AMOUNT

TO CAPITAL 80000 BY PURCHASES 25000

TO SALES 30000 BY SOHAN 18000

TO RAMESH 20000 BY PURCHASES 19000

BY DRAWING 1500

BY DINESH 16800

BY SALARIES 2000

BY BAL C/D 47700

TOTAL 130000 TOTAL 130000

 RULES
ASSETS DEBIT

EXPENSES DEBIT

LIABILITY CREDIT

INCOME CREDIT

CAPITAL CREDIT

TOTAL EQUAL EQUAL

S.no Heads of Accounts Logic DEBIT CREDIT
1 Furniture A/C ASSETS
2 Plant & Machinery A/C ASSETS
3 Discount Allowed A/C EXPENSES
4 Salary A/C EXPENSES
5 Bank Overdraft A/C LIABILITY
6 Cash in Hand A/C ASSETS
7 Creditors A/C LIABILITY
8 Sundry Debtors A/C ASSETS
9 Carriage Outwards EXPENSES
10 Carriage Inwards A/C EXPENSES
11 Sales A/C INCOME
12 Purchases A/C EXPENSES
13 Discount Received A/C INCOME
14 Interest Received A/C INCOME
15 Interest Paid A/C EXPENSES
16 Bad Debts A/C LOSS
 INCORRECT TRIAL BALANCE
Debit Rs. Credit Rs.
Building 60000 Capital 73600
Machinery 17000 Fixtures 5600
Returns Outwards 2600 Sales 104000

Bad debts 2800 Debtors 60000

Cash 400 Interest received 2600
Discount Received 3000

Bank overdraft 10000

Creditors 50000

Purchases 100000
 INCORRECT TRIAL BALANCE
Debit Rs. Credit Rs.
Building 60000 Capital 73600
Machinery 17000 Fixtures 5600
Returns Outwards 2600 Sales 104000

Bad debts 2800 Debtors 60000

Cash 400 Interest received 2600
Discount Received 3000

Bank overdraft 10000

Creditors 50000

Purchases 100000
CORRECTED TRIAL BALANCE
Debit Rs. Credit Rs.
Building 60000 Capital 73600
Machinery 17000 Discount Received 3000
Fixtures 5600 Sales 104000

Bad debts 2800 Bank overdraft 10000

Cash 400 Interest received 2600
Debtors 60000 Returns Outwards 2600

Purchases 100000 Creditors 50000

TOTAL 245800 TOTAL 245800

 Solve the question
Account Amount Account Amount
Purchases 170000 Drawing 7700
Stock on 1st April 2018 24000 Return inward 3500
Sales 105000 Premises 528000
Sundry debtors 23800 Sundry Creditors 16100
Discount received 3500 Discount Allowed 2800
Carriage outwards 700 Carriage Inwards 1400
Cash in hand 3500 Cash at Bank 17500
Machinery 124500 General Expenses 2100
Provision on depreciation 24200 Bad Debts written off 2450
Provision For Doubtful Debts 2380
 SOLUTION

HEADS OF ACCOUNTS Dr. Cr.

Purchases 170000
Stock on 1st April 2018 24000
Sales 105000
Sundry debtors 23800
Discount received 3500
Carriage outwards 700
Cash in hand 3500
Machinery 124500
Provision on depreciation 24200
 Drawing 7700
Return inward 3500
Premises 528000
Sundry Creditors 16100
Discount Allowed 2800
Carriage Inwards 1400
Cash at Bank 17500
General Expenses 2100
Bad Debts written off 2450
Provision For Doubtful Debts 2380
CAPITAL 760770
911950 911950
FEW POINTS NEED TO BE DISCUSSED

• Outstanding expenses
• Prepaid Expenses
• Accrued Income
• Income received in Advance
• Accrual Basis of accounting
• Cash basis
• Goods
• Inventory
• Capital expenditure
• Revenue expenditure
• Deferred Revenue Expenditure
• Sales
• Cost of goods sold
• Revenue
• Income/Profit
• Debtors /Bills Receivable
• Creditors /Bills Payable
• Bad Debts
• Provisions
 CAPITAL & REVENUE EXPENDITURE
1. Carriage paid on goods purchased Rs. 25
It is a revenue expenditure as it is related to the goods purchased for
resale.
2. Rs. 2,000 spent on repairs of machinery
It is a revenue expenditure as it relates to the maintenance of a fixed
asset.
3. Rs. 5,000 spent on white washing
It is a revenue expenditure as it relates to the maintenance of a fixed
asset.
4. Rs. 8,000 paid for import duty and cartage on the purchase of
machinery from West Germany
It is a capital expenditure as it is spent in connection with "the
purchase‘ of a fixed asset
5 Rs. 25,000 spent on issue of equity shares
It would be treated as deferred revenue expenditure. It is a heavy
amount incurred in connection with raising of capital for the company
and so capitalised. Even under the Indian Companies Act and the
Indian Income Tax Act this expenditure is allowed to be written off
over a number of years.
6. Rs. 14,000 spent on spreading new tiles on factory floor )
It is a revenue expenditure as it is treated as a sort of repairs not
leading to any increase in the earning capacity of a fixed asset
7. Rs. 4.000 paid as brokerage in connection with the purchase of land )
It is a capital expenditure as it is incurred in connection with the
purchase of land.
8. Rs. 60,000 spent on construction of railway siding
It is a capital expenditure as it is incurred on the construction of railway
siding, a fixed asset.
9. Rs. 1,55,000 spent on uniforms to staff
It is a revenue expenditure. But, if the uniforms are meant for use over
two or more years (woollen uniform) this expenditure can be treated
as deferred revenue.
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