Question
What are objectives or functions of a Trial Balance?
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Answer
Objectives or Functions of Trial Balance:
- To Ascertain the Arithmetical Correctness of Ledger Accounts: The Trial Balance enables one to establish whether posting and other accounting processes have been carried out without committing arithmetical errors.
- To Help Prepare the Final Accounts: Financial Statements are prepared from the Trial Balance. Preparation of Financial Statements, therefore, is the second objective of preparing a Trial Balance.
- Summary of Each Account: The Trial Balance is a summary of each Ledger Account. The ledger account may have to be referred only when more detail is required in respect of an account.
- To Help in Locating Errors: The Trial Balance helps in locating errors in maintaining Book of Account. It should, however, be kept in mind that it does not disclose, i.e., show all the errors in Book Keeping except the arithmetical inaccuracies.
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→He used goods worth $₹\ 1,300$ for personal purposes and paid $₹\ 500 $ to his son for examination and college fees. On $31^{st}$ March, $2019$, his Debtors were worth $₹\ 21,000$ and Creditors $₹\ 15,000. $ Stock in trade was valued at $₹\ 10,000.$ Furniture to be depreciated by $10%$ p.a. Prepare Trading and Profit and Loss Account for the year ended on $31^{st}$ March, $2019$, and Balance Sheet as at $31^{st}$ March, $2019.$
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Salary ₹ $5,400$ Insurance ₹ $2,500$ Cash ₹ $400$ Purchases ₹ $84,170$ Rent Received ₹ $3,150$ Drawings ₹$ 2,100$ Bills Payable ₹ $3,900$ Debtors ₹ $38,080$ Stock ($1^{st} $April, $2018) ₹ 29,500$ Bank Overdraft ₹ $9,700$ Carriage ₹ $2,200$ Creditors ₹ $4,200$ Trade Expenses ₹ $4,900$ Sales Return ₹ $4,700$ Machinery ₹ $12,000$ Wages ₹ $45,000$ Sales ₹ $1,47,200$ Purchases Return ₹ $3,900$ Capital ₹ $58,900$ Closing Stock ($31^{st}$ March, $2019) ₹ 36,200.$
→Salary ₹ $5,400$ Insurance ₹ $2,500$ Cash ₹ $400$ Purchases ₹ $84,170$ Rent Received ₹ $3,150$ Drawings ₹$ 2,100$ Bills Payable ₹ $3,900$ Debtors ₹ $38,080$ Stock ($1^{st} $April, $2018) ₹ 29,500$ Bank Overdraft ₹ $9,700$ Carriage ₹ $2,200$ Creditors ₹ $4,200$ Trade Expenses ₹ $4,900$ Sales Return ₹ $4,700$ Machinery ₹ $12,000$ Wages ₹ $45,000$ Sales ₹ $1,47,200$ Purchases Return ₹ $3,900$ Capital ₹ $58,900$ Closing Stock ($31^{st}$ March, $2019) ₹ 36,200.$
Following balances are taken from the books of Niranjan. Prepare Trading and Profit and Loss Account and Balance Sheet for the year ended 31st March, 2019:
(iamge)
Adjustments:
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Adjustments:
- Closing Stock ₹ 7,50,000.
- Depreciate Machinery by 10% and Furniture by 20%.
- Wages ₹ 50,000 and salaries ₹ 20,000 are outstanding.
- Write off ₹ 50,000 as further Bad Debts and create 5% Provision for Doubtful Debts. Also, create a reserve for discount on Debtors @ 2%.
- Investments were made on 1st July, 2018 and no interest has been received so far.