Example: Preparation of Trial Balance Video Lecture - Commerce

so let us continue with our example when
we first prepared the journal this were
these working transactions capital
introduced cash was deposited into Bank
truck was purse cheese be drawn from
Bank etc etc ston this we have prepared
a journal and from the journal this is
the Journal yeah from the journal we had
posted to the ledger and we will now
look at the ledger accounts from which
we are going to draw the trial balance
say for example this is the cash book we
had cash book debit side debit what
comes in
so debit is all receipts of cash we had
on account of capital 3 lakh pintron
from Bank 3000 on account of sales 20000
and cash was used money was deposited
into the bank vehicle was purchased
amount was withdrawn by the owner on
account of purchases paid to whole our
telephone charges salary was paid and we
had a balance of 1 lakh 75 1 like 70
$8,500 this balance balance carried down
one lakh 78 five hundred is a debit
balance why is it a debit balance
because this indicates when I place this
when we place this balance on the credit
side it indicates that the debit side is
more and this is only a balancing act
balance brought down you see this is a
debit balance so cash has a debit
balance
therefore trial balances provide
something like this the nature of an
account cash and we have debit balance
of one lakh seventy eight thousand five
hundred
for a ledger folio so this cash account
in the ledger see this is in the books
off in the books of whoever which of
businesses books we are preparing it is
entire
the nature which has what is a ledger a
ledger is a book containing the entire
set of accounts in the ledger we have a
cash account this may be on page one
capital account may be on page 10
the reference is put here maybe cash is
1 and capital estate that is the ledger
folio reference NF so normally the the
columns in case of a trial violence we
may have a serial number just to number
the accounts we have the name of the
account cash capital whatever then we
have a ledger folio so that we can trace
back in case of errors we can check from
where the balance was correctly brought
forward and whether it was corrected on
forward debit balance and the credit
balance so in this case one lakh 78504
stood debit balance of 1 lakh 78,000
fact we see the capital account when we
look at the capital account we see it
has a credit balance mind you this
indicates a credit balance because
credit side is more so this 3 lakh is
the credit balance so capital 3 1 this
is how we go about preparing or client
balance but for the other accounts we
had we had cash we had capital we had
bank
what is the bank balance bank balance is
1 lakh 1,500 I repeat it is a debit
balance debit column this indicates that
it side is more by 1 lakh 1,500 cash was
already one like 78 503 lat
now you have one lakh 1,500 what about
vehicle vehicle again balance brought
down 90,000 90,000 debit balance
drawings account debit balance balance
carry down debit side is more 5,000 bike
loan bank loan credit side is more
90,000
bank loan 90,000 purchases account for
chases account balance 36,000 36,000
debit is it a debit balance yes it's a
debit balance by balance carry down here
means the debit side is more so silly
the next speed in next month we have
taken it forward on the debit side let's
look at Lola's account
Lola's account to balance carried down
is 2500 that means this is a credit
balance this is a credit balance molas
account 2500 the just to understand what
does bolas account here represent there
was a purchase of 6000 payments made
3000 and discounted so there is still a
balance to be set in 2500 so what is
bolas account bola is actually the
person from whom we purchased on credit
this is a redditer account it is a
creditor account credit balance means
there is a liability to a whole so if
you notice cash is an asset Bank is an
asset vehicle is an asset drawings is an
asset because it is a receivable
purchase account is an expense on the
other side if you look at the credit
side we have capital credit you have
bank loan liability bowl of a creditor
account there were other accounts yes
there is discount receipt discount
received income logically should be a
credit balance let's see yes it's 500
credit discount receipt 500 sales
similarly again credit balance 40000
credit balance why is it a credit
balance because the credit side is more
next you have a Ramesh's account
Ramesh's account what is the balance
10000 this is a debit balance 10000 we
had somewhere accounts discount allowed
discount allowed 500 debit balance 500
salaries 30000 debit balance 13,000
telephone charges debit balance 500
interest received this is a credit
balance interest you see two thousand
now if we total up the trial balance it
is tallied so our automatically are
posting our casting casting is what
opening of an account was called casting
was correct are posting casting and this
has ensures the arithmetic electracy all
the transactions that we had recorded
first in the journal and then posted to
the ledger once more I'd like to
emphasize that when we prepare our trial
balance if we notice what consists of
the debit balance if we take our
accounting equation assets and expenses
assets and expenses have debit balances
sx and expenses have debit balance
incomes and liabilities have credit
balance that is just checked whether
that s that logic holds good
see for example cash is an asset debit
balance and looking at only the debit
balance the adviser should be asset or
expand as it all expense next we have
bank account again asset receivable from
mind bank it is possible that it could
also be a credit balance if we will draw
more money from the bank than we have
deposited that is a case of a bank
overdraft vehicle vehicle is an asset
debit balance
next is drawings drawing season and said
because it is receivables from the
proprietor what is the drawings account
drawing the combin money
drawn by the proprietor from the
business we call it drawings are tough
we don't take it to capital so capital
is a liability of the business whereas
drawing is the money that the proprietor
has been drawn and therefore the
proprietor goes to the business what is
the other purchases purchases is an
expense account next debit we have is
ten thousand Ramesh was our data account
debtor receivable we sold goods to
Daanish money is to be received from him
therefore it's an asset discount allowed
is an expense salary account is an
expense telephone charges is an expense
let us look at the liability side asana
credit side it will either be liability
or it will be income first three luck is
what capital what is this liability
liability of the business to the
proprietary college liability of we
often refer to it as simply capital next
balance is 90,000 bank loan is a
liability bank loan is a liability 2500
bola bola is a liability we owe we have
P purchase goods from bola and need to
pay full liability to pay this counter
is sealed is an income is an income is
an income sales is an income what is
anything else yes there is two thousand
interest receipt is also an anchor so
assets and expenses have debit balances
liabilities and incomes have credit
balances
this is how the trial pals trial balance
will look trial balance as on a
particular date and repeat this is a
relevant on a particular date maybe that
was thirty first first it is relevant or
not particular date so trial balance is
always as act so and so date or as on so
and so date you don't have our trial
balance for a period you have trial
values on a particular date because the
very next day many of these balances can
change so the first one is just a
reference a serial number
next is the name of the account the
ledger folio what is this ledger folio
what is the ledger folio I present the
page number folio is the page number
page number from which this account
balance was drawn the page number in the
nature from which this balance is taken
then you have debit balance and you have
credit balance total should agree if we
have done the posting cost incorrectly
the total debit and credit total in our
trial balance will and they think this
is balances were taken this is the
balance method the other method is to
take the total total loss Viacom hands
not very popular there to the debit and
credit will Danny but it doesn't really
give us much information for example in
the cash account the total of the debit
side was 3.23 thousand and we credit
side total was one lakh forty two
thousand five hundred the difference
worth gave us the balance stitches with
what we prepared the trial balance under
the balance
similarly capital did not have anything
on the debit side the credit total was
three so this has a totals of the
accounts the debit total and the credit
side not very popular does one give us a
summary of the account balances like we
get in case of the balance method
another
is a combination method total unbalanced
market under this same thing you have
extra two columns actually it's a
combination of both so you have a serial
number the name of the account ledger
folio the debit balance and the credit
balance also total debit and the total
credit difference of these two gives you
the balance here if the debit side is
more to give you a debit balance if the
credit side is more it gives you a
credit balance this is a third method of
preparing the trial