Definition

A Trial Balance is a list of balances on the accounts in the ledger at a certain date. (Coucom, C. (n.d.). IGCSE & O-Level Accounting.)

Objectives & Advantages of Trial Balance

• It checks the arithmetical accuracy of ledger accounts
  
• It gives material for preparing final accounts
  
• To have a proof that the double entry of each transaction is made

Important Keys Points When Preparing A Trial Balance

1. It should be remembered that all the assets, drawings, and expenses accounts are always debited
   
2. All liabilities, capital and incomes are always credited
   
3. Closing stock is never recorded in a trial balance
   
4. Opening stock (stock at the beginning of the accounting period) is treated as asset and hence debited
   
5. Debit total and credit total are equal
   
6. If debit total and credit total are not equal then the difference is transferred to suspense account/labelled as “suspense a/c difference” in the trial balance

Simplified Table of Accounts Belonging to Debit or Credit Side

Debit Side/Debit Balances	Credit Side/Credit Balances
Assets	Liabilities
Expenses	Incomes
Drawings	Capital
Purchases	Sales
Sales Returns	Purchases Returns

Example Question 1

Test your knowledge with the following question!

First identify what elements of accounting to these accounts belong to, whether it is asset or income, then identify whether it has a debit or credit balance (i.e. which side it should be written in the trial balance):

Sales a/c	Income	1 000	Cr	Stationary a/c	Expense	80	Dr
Purchases a/c		1 500		Bank a/c		500
Machines a/c		4 000		Cash a/c		200
Sales returns a/c		200		Bank loan a/c		1 500
Purchases returns a/c		300		Discount allowed a/c		100
Capital a/c		15 000		Discount received a/c		150
Creditors a/c		1 400		Rent received a/c		450
Debtors a/c		800		Premises a/c		12 000
Wages a/c		1 400		Rent payable a/c		500
Insurance a/c		1 200

Answer

Let us fill in the table to identify which element each account belongs to and what type of balances do they have:

Sales a/c	Income	1 000	Cr	Stationary a/c	Expense	80	Dr
Purchases a/c	Expense	1 500	Dr	Bank a/c	Asset	500	Dr
Machines a/c	Asset	4 000	Dr	Cash a/c	Asset	200	Dr
Sales returns a/c	Expense	200	Dr	Bank loan a/c	Liability	1 500	Cr
Purchases returns a/c	Income	300	Cr	Discount allowed a/c	Expense	100	Dr
Capital a/c	Capital	15 000	Cr	Discount received a/c	Income	150	Cr
Creditors a/c	Liability	1 400	Cr	Rent received a/c	Income	450	Cr
Debtors a/c	Asset	800	Dr	Premises a/c	Asset	12 000	Dr
Wages a/c	Expense	1 400	Dr	Rent payable a/c	Liability	500	Cr
Insurance a/c	Asset	1 200	Dr

Now, let us put them in a Trial Balance: (super duper easy)

Example Question 2

There are errors in the following Trial Balance. Can you identify them?

To avoid confusion, let us first identify the elements of each of those accounts!

Particulars	Element	Amount	Dr/Cr
Cash	Asset	300	Dr
Bank overdraft	Liability	3 000	Cr
Capital	Capital	42 500	Cr
Drawings	Drawings	750	Dr
Land and buildings	Asset	30 000	Dr
Office equipment	Asset	1 050	Dr
Loan from AB Company	Liability	2 200	Cr
Inventory	Asset	7 500	Dr
Purchases	Asset (long term)/Expense (short term)	9 850	Dr
Sales	Income	10 650	Cr
Sales returns	Expense (faulty goods returned by your buyer)	940	Dr
Purchases returns	Income (review Topic 2 Part A if you’re confused)	1 030	Cr
Carriage inwards	Expenses	400	Dr
Wages	Expenses	1 500	Dr
Rent receivable	Income	830	Cr
Sundry expenses	Expenses	1 290	Dr
Trade receivables (aka. debtors)	Assets	12 300	Dr
Trade payables (aka. creditors)	Liability	5 670	Cr

Answer

Now, we put them in a Trial Balance:

Another format would look like this:

Feel free to use any of the 2 formats when making a Trial Balance. Just ensure that the ending should be “Trial Balance at…”. I used the one my teacher taught me (cause I felt like it was simpler), and it got accepted during IGCSE exams.

Use the one you think is easier to draw. If you feel like, “hmm, the one in the textbook I think is easier..” then go ahead and use it! ^^

Example Question 3

Vera is a trader. The following balances appeared in her books on 31 April 2023. Prepare Vera’s trial balance at 31 April 2023.

	$
Sales	85 000
Purchases	52 500
Bank overdraft	1 500
Cash	500
Trade payables	5 000
Trade receivables	7 000
Furniture and equipment	27 000
Wages	22 000
Sundry expenses	3 500
Rent payable	3 200
Purchases returns	400
Inventory	9 000
Drawings	10 000
Capital	40 000

Answer

You know what to do. Identify the elements and their corresponding balances. (unless you’re a prodigy, I recommend writing it down one by one first).

Particulars	Elements	Dr/Cr
Sales	Income	Cr
Purchases	Expenses	Dr
Bank overdraft	Liabilities	Cr
Cash	Asset	Dr
Trade payables	Liabilities	Cr
Trade receivables	Asset	Dr
Furniture & Equipment	Asset	Dr
Wages	Expenses	Dr
Sundry expenses	Expenses	Dr
Rent payable	Liability	Cr
Purchases returns	Income	Cr
Inventory	Assets	Dr
Drawings	Drawings	Dr
Capital	Capital	Cr

Now let’s put this in Trial Balance:

Another format, if we follow the textbook:

Trial Balance and Errors

When there are errors in your trial balance / if your trial balance fails to balance, it can be because of the following:

1. an error of addition within the trial balance
   
2. an error of addition within one of the ledger accounts
   
3. entering a different figure on the credit to that entered on the debit when making a double entry in the ledger
   
4. making a single entry for a transaction rather than double entry
   
5. entering a transaction twice on the same side of the ledger

However, if a trial balance have the same amount of balance or its debit and credit side is equal, it can still mean that the double entries recorded are not completely free of error. There are 6 type of errors that may occur but cannot be revealed through a trial balance:

Name of Error	Description of Error	Example
Error of commission	When a transaction is entered using the correct amount and on the correct side but in the wrong account	Cash received from Marji (as Income), but you credit the $ to Maddie’s a/c
Error of complete reversal	When the correct amount is entered in the correct accounts, but the entry has been made on the wrong side	Purchases debited to bank account and credited to purchases a/c (when you’re supposed to credit it from bank a/c and debit it in purchases a/c)
Error of omission	When a transaction has been completely omitted from the accounting records.	Payment for vehicle expenses not entered in books
Error of original entry	When a transaction is recorded with the wrong figures.	Drawings, $150, but recorded as $1500
Error of principle	When a transaction is entered using the correct amount and on the correct side, but in the wrong class of account	Wages paid for installation of equipment is debited to wages a/c (it should be debited to equipment account instead)
Compensation errors	When two or more errors cancel each other out	Purchases account under-added by $200 and sales returns account over-added by $200

Check Out The Previous Topic!

https://prodatblog.org/igcse-accounting-topic-2-double-entry-book-keeping/

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