LEARNING OUTCOME NO.

2
TRANSFER BALANCES FROM THE LEDGER

Contents:

1. Income and expense accounts

Assessment Criteria:

1. Asset, liability, and equity balances are transferred in accordance with

Chart of Accounts
2. Income and expense balances are transferred in accordance with
Chart of Accounts

Conditions:

The participants will have access to:

1. Contextual Learning Laboratory

2. Learning Materials
3. Supplies
 Paper
 Pencil
 Eraser

Assessment Method:

1. Written test
2. Practical exercises
3. Interview

Document No. NTTA-TM1-07

Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
 Learning Experiences
Learning Outcome 2
TRANSFER BALANCES FROM THE LEDGER

Learning Activities Special Instructions

Read Information Sheet 3.2-1
Internal Control Fundamentals
Answer Self-check 3.2-1
Compare and check the answers
with the answer keys in
information sheet 3.2-1
Read and understand the
Information Sheets and check
yourself by answering the Self-check.
You must answer all questions
correctly before proceeding to the
next activity.
Perform the Task Sheet and Job
Sheet to help you practice your
skills.
You may refer to the Information
Sheets to determine if you are doing
the right procedures.
The Performance Criteria Checklist
will guide you and help you evaluate
your work as you are practicing your
skill.
Evaluate your own work using the
Performance Criteria. When you are
ready, present your work to your
trainer for final evaluation and
recording.
If you have questions about the Task
Sheet and Job Sheet, please ask your
trainer.
After doing all activities of this
Leaning Outcome, you are ready to
proceed to Preparing internal policy
compliance report.

Document No. NTTA-TM1-07

Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
 INFORMATION SHEET 3.2-1

One other important use of the trial balance is that it can determine
the arithmetic accuracy of the accounts. So if both columns of the
trial balance tally, we can be reasonably assured of the accuracy of
the accounts. It does not ensure that the accounts are free of all errors
but it can at least establish mathematical accuracy.

Preparation of Trial Balance

Preparation of trial balance is the third step in the accounting process.
First, we record the transactions in the journal. And then we post
them in the general ledger. Then we prepare a trial balance to verify
that the debit totals equal to the credit totals. Let us take a look at the
steps in the preparation of trial balance.

Learn more about Objectives and Limitations of Trial Balance here

Document No. NTTA-TM1-07

Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
1. To prepare a trial balance we need the closing balances of all the
ledger accounts and the cash book as well as the bank book. So
firstly every ledger account must be balanced. Balancing is the
difference between the sum of all the debit entries and the sum of
all the credit entries.
2. Then prepare a three column worksheet. One column for the
account name and the corresponding columns for debit and credit
balances.
3. Fill out the account name and the balance of such account in the
appropriate debit or credit column
4. Then we total both the debit column and the credit column.
Ideally, in a balanced error-free Trial balance these totals should be
the same
5. Once you compare the totals and the totals are same you close
the trial balance. If there is a difference we try and find and
rectify errors. Here are some cases that cause errors in the trial
balance

 A mistake in transferring the balances to the trial balance

 Error in balancing an account
 The wrong amount posted in the ledger
 Made the entry in the wrong column, debit instead of credit or
vice versa
 Mistake made in the casting of the journal or subsidiary book
Rules for Preparation of Trial Balance
While preparation of trial balances we must take care of the
following rules/points

1] The balances of the following accounts are always found on the

debit column of the trial balance
Document No. NTTA-TM1-07
Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
 Assets
 Expense Accounts
 Drawings Account
 Cash Balance
 Bank Balance
 Any losses
2] And the following balances are placed on the credit column of the
trial balance

 Liabilities
 Income Accounts
 Capital Account
 Profits

Document No. NTTA-TM1-07

Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
 TASK SHEET 3.2-1

Prepare a trial balance as on 31st Dec 2013 by filling in the debit

and credit columns accordingly for each ledger balance mentioned
below.

Account Balance Account Balance

Capital 70,000 Carriage Inwards 1500

Opening Stock 20,000 Carriage Outwards 2000

Salaries 10,000 Plant & Machinery 17,000

Returns Inward 500 Investments 7000

Returns Outward 6000 Sales 70,000

Purchases 80,000 Patents 10,000

Sales Ledger Control 7000 Furniture 8000

Purchase Ledger Control 40,000 Discount Allowed 1000

Cash in Hand 15,000 Misc. Receipts 4000

Cash at Bank 11,000 Closing Stock 9000

Document No. NTTA-TM1-07

Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
 ANSWER KEY 3.2-1

Trial Balance From the Above Ledger (31st Dec 2013)

Particulars Debit Credit

Capital 70,000

Opening Stock 20,000

Salaries 10,000

Returns Inward 500

Returns Outward 6000

Purchases 80,000

Sales Ledger Control 7000

Purchase Ledger Control 40,00

Cash in Hand 15,000

Cash at Bank 11,000

Carriage Inwards 1500

Carriage Outwards 2000

Plant & Machinery 17,000

Investments 7000

Sales 70,000

Patents 10,000

Furniture 8000

Document No. NTTA-TM1-07

Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
The way a balance is transferred to either debit or credit side of a trial
balance depends on the nature of that account, below is the table showing
the relationship between types of accounts and their usual balances.

Document No. NTTA-TM1-07

Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
LEARNING OUTCOME NO. 3
SUMMARIZE TRIAL BALANCE

Contents:

1. Debit and credit

Assessment Criteria:

1. Debits and credits are totaled with 100% accuracy

2. Trial Balances are extracted with 100% accuracy.

Conditions:

The participants will have access to:

1. Contextual Learning Laboratory

2. Learning Materials
3. Supplies
 Paper
 Pencil
 Eraser

Assessment Method:

1. Written test
2. Practical exercises
3. Interview

Document No. NTTA-TM1-07

Date Developed: Issued by:
September 2019 NTTA
Bookkeeping NC III Date Revised:

Checking Policy Developed by:

Compliance Vangie D. Manguil
Revision #
00
 Learning Experiences
Learning Outcome 3
SUMMARIZE TRIAL BALANCE
Learning Activities
Read Information Sheet 3.3-1
Internal Control Fundamentals
Answer Self-check 3.3-1
Compare and check the answers
with the answer keys in
information sheet 3.3-1
Special Instructions
Read and understand the
Information Sheets and check
yourself by answering the Self-check.
You must answer all questions
correctly before proceeding to the
next activity.
Perform the Task Sheet and Job
Sheet to help you practice your
skills.
You may refer to the Information
Sheets to determine if you are doing
the right procedures.
The Performance Criteria Checklist
will guide you and help you evaluate
your work as you are practicing your
skill.
Evaluate your own work using the
Performance Criteria. When you are
ready, present your work to your
trainer for final evaluation and
recording.
If you have questions about the Task
Sheet and Job Sheet, please ask your
trainer.
 INFORMATION SHEET 3.3-1

SUMMARIZING THE TRIAL BALANCE

If the "debit DR" and "credit CR" balance totals do not match in the trial balance exercise, there is an
accounting error somewhere in the account balances. The firm will try to find the mistakes responsible
for the mismatch, and correct them, before publishing financial statements. During the trial balance
period, accountants will also search for and try to fix other kinds of accounting errors that the trial
balance does not reveal.

Any material errors in the account balances they do not find and fix before publishing financial
statements may result in an external auditor's opinion that is either "Qualified" or "Adverse."

The Trial Balance Reveals Some Kinds of Errors

A mismatch between debit and credit totals in the trial balance usually means that one or more
transaction postings from journal to ledger are either in error or missing. Accountants may ultimately
have to examine every debit-credit pair of journal entries to find the mistake.

There are, however, some well-known indicators for certain kinds of problems. These indicators help
reveal specific errors without having to resort to a complete transaction-by-transaction review. For
instance:
 If an account balance incorrectly appears as debit balance when it should be a credit balance
(or the reverse), the difference between the debit total and credit total will be twice the value of
this balance. And, the difference will divide evenly 2.

Therefore, when the accountant finds a trial balance difference divisible by 2, the first step is to
look for an account balance exactly half the difference. That is most likely the misplaced balance.
 When the difference between debit and credit totals is evenly divisible by 9, this is a
mathematical indicator that the account balances may include a transposition error in one of the
accounts.

A debit balance that should be 12,578 may appear as something like 12,587, for instance.
 When the difference between debit and credit totals is divisible neither by 9 or by 2, it is
possible that a single "debit" or "credit" balance is missing from the account lists.

Making Account Balance Adjustments

Because the trial balance must balance, accountants may also adjust specific accounts, so that total
"debit DR" and "credit CR" balances match. Adjustments are not so much a matter of fixing errors, as
they are improvements in the accounting accuracy. The intent is to match revenues and expenses
more correctly to the appropriate period.

Adjusting entries to balance the trial balance typically impact two kinds of expense and asset category
accounts: accrual accounts and prepayment accounts:
 Adjustments to accrual accounts (such as "accrued depreciation," or "accrued interest
expense") are made to reflect more accurately the timing of actual expense accrual.
 Adjustments to prepayment accounts (such as prepaid insurance, office supplies, or floor
space rental) help match the timing for using goods or services.

The Trial Balance is Blind to Other Kinds of Errors

The trial balance test does not detect the following kinds of errors.

 The paired debit and credit figures for a transaction may both match but still be incorrect.
Such a mistake may be accidental, or it may be deliberate deception by the accountant. Either
way, the trial balance is blind to the problem.
 Some transactions that should have entered the system have not. This mistake is an error of
omission, not visible to the trial balance.
 The firm makes an entry as a debit to an account when it should have a credit, and its
corresponding co-transaction registers as a credit when it should be a debit. Such a mistake is
an error of reversal. When this happens, total "debits" still equal total "credits."
 The firm may enter a transaction in the correct kind of account (e.g., "Asset account" or
"Expense account") but still choose an incorrect account within the category. The contributions to
total debits and total credits will be equal.
 Two or more errors in different accounts may be offsetting, to cancel each other. If, for
instance, a credit transaction in one account is $100 too high, and if in another a debit transaction
is $100 too high, the trial balance will still balance.
 TASK SHEET 3.3-1
Prepare a Trial Balance for Shining Brothers Pvt. Ltd. at March 31st,
2017?
 
ANSWER KEY 3.3-1
 TASK SHEET 3.3-2
There are several Mistakes in the Umer & Brothers (Pvt.) Ltd. Trial
Balance. You are requested to identify Errors and make corrected Trial
Balance?
PERFORM CRITERIA CHECK LIST 3-3-2