PA 101

FUNDAMENTALS OF ACCOUNTING
By : Nwa

Learning outcomes: Upon completion of this course, students should be able to: 1. Explain the purpose of preparing Trial Balance and its function in accounting record system. 2. Prepare closing and balance off T-accounts. 3. Show the Trial Balance.

Trial Balance
The purpose of preparing Trial Balance and its function in accounting record system. Closing and balance off T-accounts. The Trial Balance.

introduction OF trial balance

Is a statement prepared based on account balance in the ledgers at the end of an accounting period. All accounts with debit balances will be listed in the debit side, while accounts with credit balances will be listed in the credit side. The total debit amount must be equal to the total credit amount. If the amounts are not balanced or not equal, this means errors and mistakes occurred when entries were made into the accounts and futher checking must be done.

Purposes & functions of tb in the accounting record system TRIAL BALANCES ARE PREPARED IN ORDER TO:
Check the accuracy of calculations Verify the accuracy of double entries Verify the accuracy of postings from the book to ledgers

And prepare financial statements.

CLOSING & BALANCE OFF ACCOUNTS

All ledger accounts must be balanced before a trial balance is prepared. A ledgers account is balanced by comparing the total debit amount with the total credit amount, and determining which amount is larger.

Example 1.0
Dr 2010 1 Jan Bal b/f 10 Dec Sales

Account A RM 2010 200 4 Jun Cash 273 31 Dec Bal c/f 473 31 Dec Bal b/f 423

Cr RM 50 423 473

Dr 2010 3 May Cash 31 Dec Bal c/f

Account B RM 2010 410 20 Apr Cash 240 650 31 Dec Bal b/f 240

Cr RM 650
650

Balance b/f is the balance brought forward from the previous accounting period. For Account A, which existed prior to this period, the balance b/f for 1 January is the balance brought forward from the previous period. Account A is balanced according to the side with the larger total amount: Total debit amount > total credit amount, therefore Account A has a debit balance.

Account B is balanced according to the side with the larger total amount: Total credit amount > total debit amount, therefore Account B has a credit balance. Account balance principles and types of balance are as follows: a) if the total debit amount exceeds the total credit amount, then the account is to have a debit balance. b) if the total credit amount exceeds the total dedit amount, then the account is to have a credit balance.

PREPARATIONS OF TRIAL BALANCE

A trial balance is prepared by listing all ledger account names and their balance types.
Account Assets Expenses Owners Equity Liabilities Revenues Debit Balance Credit Balance

A trial balance can be prepared according to the following format: a) T Format b) Statement Format

Trial Balance T Format

Trial Balance as at 31 Dec 2010

Account Debit Account Credit

Assets Expenses

300 500
800

Capital Liabilities Revenues

250 150 400 800

Trial Balance Statement Format

Trial Balance as at 31 Dec 2010

Account Debit Credit

Assets Expenses Capital Liabilities Revenues

300 500
250 150 400 800

800

The process is:

JOURNAL LEDGER TRIAL BALANCE

Example of Trial Balance (Exercise)