Page 115 - DCOM101_FINANCIAL_ACCOUNTING_I

Unit 10: Trial Balance

10.3 Methods of Preparing Trial Balance Notes

Generally speaking there is one method of preparing Trial Balance i.e., by balance method. But as
per Accountants, the following are the methods of preparing Trial balance:
1. By Balance Method
2. By Total Method

3. By Combined Method i.e., Balance and Total Method
The given below is the explanation of methods:
1. Balance Method: Under this method, as the name of method suggests, the balance of each
account is taken. This method is very simple, easy to calculate, saves both time and labour.
That is why it is in vogue.
2. Total Method: Under this method, instead of taking balance of each account, the total of
both the sides of each account is taken.
3. Combined Method: Under this method, as it is clear from the name of the method, both the
above explained methods i.e., balance as well as total method are used. This method is not
in use because of wastage of time and labour.

Preparation of Trial Balance with the Help of Balances

In the examination problems, the Ledger accounts are not given but a list of balances of accounts
is given. With the help of these balances the students are asked to prepare the Trial Balance.
Students should kept in mind the following rules to prepare a Trial Balance:
1. The balances of all the assets accounts and drawing accounts are recorded in the debit side
of the Trial Balance.

2. The balances of all the liabilities and capital accounts are recorded in the credit side of the
Trial Balance.
3. The balances of all expenses and losses of the business are showed in the debit side of the
Trial Balance.
4. The balances of all incomes and gains are disclosed in the credit side of the Trial Balance.
5. The balances of sales and sale returns are disclosed in the credit side and debit side of Trial
Balance respectively.

6. The balances of purchases and purchase returns are disclosed in the debit side and credit
side of the Trial Balance respectively.
Illustration 1: Mr. Akshey Kumar furnishes the following balances as on 31 March, 2008. You
st
have to prepare a Trial Balance with the following information:
Particulars ` Particulars `
Interest on Capital 24,000 Salaries 1,28,000
Creditors 6,00,000 Capital 8,00,000
Discount Received 23,000 Drawings 2,46,000
Loan 1,74,000 Machinery 3,00,000
Purchase Returns 40,000 Bills Payable 20,000
Sales Return 6,000 Furniture 6,00,000
Advertisement 1,63,000 Debtors 5,00,000
Commission Received 20,000 Bank Loan 2,00,000
Rent 10,000 Patents 60,000
Purchases 19,00,000
Sales 32,60,000
Opening Stock 12,00,000

LOVELY PROFESSIONAL UNIVERSITY 109