Samacheer Kalvi Class 11 Accountancy Solutions Chapter 5 Trial Balance

I. Multiple Choice Questions
Choose the correct answer.

Question 1. Trial balance is a _______.
(a) Statement
(b) Account
(c) Ledger
(d) Journal
Answer: (a) Statement
In simple words: A trial balance is a list that shows all the debit and credit balances from the ledger accounts. It is used to check if the total debits equal the total credits, but it is not a part of the double-entry accounting system itself.

🎯 Exam Tip: Remember that a trial balance is a *statement*, not an *account*. This distinction is key in accounting principles.

Question 2. After the preparation of ledger, the next step is the preparation of _______.
(a) Trading account
(b) Trial balance
(c) Journal
(d) Profit and loss account
Answer: (b) Trial balance
In simple words: First, you record transactions in the journal, then you move them to the ledger. After the ledger is complete, the next logical step is to create a trial balance to ensure everything adds up correctly before preparing final financial statements.

🎯 Exam Tip: Understanding the sequence of accounting steps (journal, ledger, trial balance, final accounts) is crucial for accurate financial reporting.

Question 3. The trial balance contains the balances of _______.
(a) Only personal accounts
(b) Only real accounts
(c) Only nominal accounts
(d) All accounts
Answer: (d) All accounts
In simple words: A trial balance includes every type of account—personal, real, and nominal—to provide a full snapshot of all account balances. This helps verify that all financial figures are consistent.

🎯 Exam Tip: A comprehensive trial balance lists all ledger balances, ensuring that no account is left out when checking arithmetic accuracy.

Question 4. Which of the following is/are the objective(s) of preparing trial balance?
(a) Serving as the summary of all the ledger accounts
(b) Helping in the preparation of final accounts
(c) Examining arithmetical accuracy of accounts
(d) All of the options
Answer: (d) All of the options
In simple words: A trial balance helps check if the numbers are correct, summarizes all the accounts, and acts as a foundation for creating the main financial reports like the trading, profit and loss account, and balance sheet. Each of these functions is vital for clear financial record-keeping.

🎯 Exam Tip: Remember the three main purposes: summary, final account basis, and accuracy check. This covers the entire scope of a trial balance.

Question 5. While preparing the trial balance, the accountant finds that the total of the credit column is short by Rs. 200. This difference will be _______.
(a) Debited to suspense account
(b) Credited to suspense account
(c) Adjusted to any of the debit balance
(d) Adjusted to any of the credit balance
Answer: (b) Credited to suspense account
In simple words: If the credit side is less than the debit side, a suspense account is created and credited with the missing amount to make the trial balance match. This temporarily balances the books until the actual error is found and corrected.

🎯 Exam Tip: When the credit side is short, credit the suspense account. If the debit side is short, debit the suspense account. This is a crucial rule for balancing a trial balance temporarily.

Question 6. A list which contains balances of accounts to know whether the debit and credit balances are matched is _______.
(a) Journal
(b) Day book
(c) Trial balance
(d) Balance sheet
Answer: (c) Trial balance
In simple words: A trial balance is specifically designed to list all account balances and check if the total debits equal the total credits. This ensures a basic level of arithmetic accuracy in the accounting records.

🎯 Exam Tip: The primary function of a trial balance is to verify the arithmetic accuracy of the ledger accounts, which means ensuring debits match credits.

Question 7. Which of the following method(s) can be used for preparing trial balance?
(a) Balance method
(b) Total method
(c) Total and Balance method
(d) All of the options
Answer: (d) All of the options
In simple words: There are three ways to make a trial balance: using just the final balances, using the total debits and credits, or using a combination of both. Each method achieves the same goal of checking for accuracy.

🎯 Exam Tip: While all methods are valid, the balance method is most commonly used as it directly provides the balances needed for final accounts.

Question 8. The account which has a debit balance and is shown in the debit column of the trial balance is _______.
(a) Sundry creditors account
(b) Bills payable account
(c) Drawings account
(d) Capital account
Answer: (c) Drawings account
In simple words: The drawings account records money or goods taken out of the business by the owner, and since these reduce the owner's equity, they are always shown with a debit balance. This is different from liabilities like creditors or capital, which typically have credit balances.

🎯 Exam Tip: Remember that assets and expenses typically have debit balances, while liabilities, revenues, and capital (except drawings) have credit balances.

Question 9. The difference of totals of both debit and credit side of trial balance is transferred to:
(a) Trading account
(b) Difference account
(c) Suspense account
(d) Miscellaneous account
Answer: (c) Suspense account
In simple words: If the total debits and credits in the trial balance do not match, the difference is temporarily placed in a suspense account. This is done to balance the books and allow for the preparation of financial statements while the error is being found.

🎯 Exam Tip: A suspense account is a temporary account used to force the trial balance to tally. It must be cleared once the errors are identified and corrected.

Question 10. Trial balance is prepared:
(a) At the end of the year
(b) On a particular date
(c) For a year
(d) None of the options
Answer: (b) On a particular date
In simple words: A trial balance shows the balances of accounts at a specific moment in time, like a snapshot, rather than showing activity over a period. This is similar to a balance sheet, which also shows financial position on a specific date.

🎯 Exam Tip: Financial statements like the balance sheet and trial balance are prepared "as on" a specific date, while income statements are prepared "for the period ended."

II. Very Short Answer Type Questions

Question 1. What is trial balance?
Answer: A trial balance is a statement that lists the debit and credit balances of all ledger accounts. It is prepared to check if the total debits match the total credits, ensuring the arithmetic accuracy of the accounting records.
In simple words: A trial balance is a list of all account balances to see if the total money coming in matches the total money going out.

🎯 Exam Tip: Define it as a "statement" and highlight its purpose of checking "arithmetic accuracy" of "ledger accounts."

Question 2. Give the format of trial balance.
Answer: Trial balance is prepared in the following format under the balance method:

🎯 Exam Tip: Clearly label all columns (S. No., Name of account/Particulars, L.F., Debit balance Rs., Credit balance Rs.) and ensure consistency in currency notation.

Question 3. What are the methods of preparation of trial balance?
Answer: Trial Balance is prepared using the following methods:

• Balance method: In this method, only the final debit or credit balance of each ledger account is recorded in the trial balance. This is the most common method as it directly provides the balances needed for financial statements.
• Total method: Under this method, the total amounts from the debit side and the credit side of each ledger account are recorded. This method is not often used because it does not directly show the final balances needed for financial statements.
• Total and Balance method: This method combines both the total method and the balance method. It provides four columns: total debits, total credits, debit balances, and credit balances. This method is generally not in practice.

🎯 Exam Tip: Focus on explaining the balance method as it is the most practical and widely accepted method for preparing financial statements.

Question 4. State whether the balance of the following accounts should be placed in the debit or the credit column of the trial balance:
(i) Carriage outwards
(ii) Carriage inwards
(iii) Sales
(iv) Purchases
(v) Bad debts
(vi) Interest paid
(vii) Interest received
(viii) Discount received
(ix) Capital
(x) Drawings
(xi) Sales returns
(xii) Purchase returns
Answer:

🎯 Exam Tip: Remember the basic accounting equation: Assets = Liabilities + Capital. Also, Debit all expenses and assets; Credit all incomes, liabilities, and capital. This helps classify balances correctly.

III. Short Answer Questions

Question 1. What are the objectives of preparing trial balance?
Answer: The main objectives of preparing a trial balance are:

1. Test of arithmetical accuracy: (i) The trial balance checks if the ledger accounts are arithmetically correct. (ii) If the total of the debit column matches the total of the credit column, it suggests that the postings from subsidiary books and balancing of ledger accounts are arithmetically sound. (iii) However, it's important to remember that some errors might not be revealed by a trial balance. 2. Basis for preparing final accounts: Financial statements, such as the trading account, profit and loss account, and balance sheet, are prepared using the summary of ledger balances provided by the trial balance. 3. Location of errors: (i) If the trial balance does not match, it indicates that errors have occurred somewhere in the accounting process. (ii) These errors could be in journalizing, recording in subsidiary books, totaling subsidiary books, posting to ledger accounts, balancing ledger accounts, carrying balances to the trial balance, or totaling the trial balance columns. (iii) These errors must be found and corrected before preparing the financial statements.

In simple words: A trial balance is made to check if the numbers are correct, to gather all account information in one place, and to help prepare the final financial reports. It also helps find mistakes if the totals don't match.

🎯 Exam Tip: When listing objectives, ensure you cover arithmetic accuracy, financial statement preparation, and error detection. It's a key part of the accounting cycle.

Question 2. What are the limitations of trial balance?
Answer: The limitations of a trial balance are:

1. A trial balance can only be prepared if the double-entry system of accounting is followed. 2. The trial balance might still balance even if some transactions are completely forgotten and not recorded. 3. Even if the trial balance totals match, it does not guarantee that there are no errors in the books, as certain types of mistakes (like errors of principle or compensating errors) are not revealed. 4. If the trial balance is not prepared properly, the final financial statements based on it may not show the true financial picture of the business. 5. Just because a trial balance agrees does not mean it is a final proof of arithmetical accuracy for all entries made.

In simple words: A trial balance might seem correct even when there are some kinds of mistakes, like forgetting a whole transaction or making errors in how things are categorized. It's only truly accurate if you follow the double-entry system and avoid specific hidden errors.

🎯 Exam Tip: Focus on errors that a trial balance *cannot* detect, such as errors of omission, compensating errors, and errors of principle, to fully explain its limitations.

Question 3. 'A trial balance is only a prima facie evidence of the arithmetical accuracy of records'. Do you agree with this statement? Give reasons.
Answer: Yes, I agree with this statement.

1. A trial balance primarily helps to check the basic arithmetic accuracy of the entries made in the accounting records. In modern computerized accounting systems, once transactions are recorded in journals, all other records like ledger postings, trial balance, and final accounts are generated simultaneously, reducing arithmetic errors significantly. 2. Therefore, arithmetic errors and posting errors from the journal to the ledger are less likely to occur in computerised accounting. 3. When the double-entry system is used correctly, the total debits and credits in the trial balance should be equal. This means the trial balance helps confirm the arithmetic accuracy of records in the books of accounts. However, it's not a foolproof guarantee, as certain errors might not affect its balance.

In simple words: Yes, a trial balance is a good first check for number mistakes because it makes sure debits and credits match. But it doesn't catch all errors, especially in computer systems where many steps happen automatically.

🎯 Exam Tip: Emphasize that "prima facie evidence" means it's an initial indication, not a conclusive proof, and briefly mention types of errors it cannot detect (e.g., errors of omission, compensating errors) if space allows.

IV. Exercises

Question 1. Prepare a trial balance with the following information:

Trial Balance:

🎯 Exam Tip: Always remember the basic nature of accounts: Assets (like Cash, Debtors, Stock) and Expenses (like Purchases) have debit balances, while Liabilities (like Bank Loan, Creditors) and Incomes (like Sales) and Capital have credit balances.

Question 2. Prepare the trial balance from the following information:

Trial Balance:

🎯 Exam Tip: When preparing a trial balance, double-check that all assets and expenses are debited, and all liabilities, capital, and incomes are credited. This ensures correct classification.

Question 3. Prepare the trial balance from the following balances of Chandramohan as on 31st March, 2017.

In the books of Chandramohan Trial balance as on 31st March 2017

🎯 Exam Tip: For liabilities like 'Loan borrowed' and 'Bank overdraft', remember they represent amounts owed, hence they typically have credit balances.

Question 4. Prepare the trial balance from the following balances of Babu as on 31st March, 2016.

In The Books of Babu Trial Balance As On 31st March 2016

🎯 Exam Tip: Pay close attention to classifying accounts as assets, liabilities, income, or expense to correctly determine if they should be debited or credited. For example, 'Bills Receivable' is an asset (debit) and 'Bills Payable' is a liability (credit).

Question 5. From the following balances of Arjun, prepare the trial balance as on 31st March, 2018.

In The Books of Arjun Trial Balance As On 31st March 2018

🎯 Exam Tip: Remember to treat 'Discount Received' as income (credit) and 'Postage' as an expense (debit) when classifying accounts for the trial balance.

Question 6. Prepare the trial balance from the following balances of Rajesh as on 31st March, 2017.

In The Books of Rajesh Trial Balance as on 31st March 2017

🎯 Exam Tip: Distinguish between 'Discount Received' (income, credit) and 'Discount Allowed' (expense, debit) to ensure correct placement in the trial balance.

Question 7. Prepare the trial balance from the following balances of Karthik as on 31st March, 2017.

In the books of Karthik Trial Balance as on 31st March 2018

🎯 Exam Tip: Be careful with items like 'Rent' and 'Rent and Taxes' – classify them as expenses (debit) unless specified as income (credit).

Question 8. From the following balances of Rohini, prepare the trial balance as on 31st March, 2016.

In the books of Rohini Trial Balance as on 31st March 2018

🎯 Exam Tip: Treat 'Lighting', 'Advertising expenses', and 'Car expenses' as operating expenses that increase debits.

Question 9. Balan, who has a car driving school, gives you the following ledger balances. Prepare a trial balance as on 31st December, 2016.

Answer: The trial balance for Balan's car driving school as of December 31st, 2016, is prepared by listing all accounts and their corresponding debit or credit balances. This report helps verify the arithmetical accuracy of the ledger. Each account, from assets like computers to liabilities like bank loans, is systematically placed in its appropriate column to ensure the totals match.

In simple words: A trial balance checks if all debits and credits from the ledger accounts are equal. This statement lists every account and its balance to ensure the books are arithmetically correct at a specific point in time.

🎯 Exam Tip: Remember to categorize each account correctly as either a debit or credit balance to ensure the trial balance tallies, which is crucial for preparing financial statements.

Question 10. The following balances are extracted from the books of Ravichandran on 31st December, 2016. Prepare the trial balance.

Answer: The trial balance for Ravichandran's books as of December 31st, 2016, lists all account balances to verify the arithmetic accuracy of the ledger entries. Each account is placed in either the debit or credit column, ensuring both totals match. This step helps in identifying any posting errors before financial statements are prepared.

In simple words: The trial balance is like a final checklist for all account balances. It helps make sure that the total money coming in (credits) and the total money going out (debits) are perfectly equal, which is a basic rule in accounting.

🎯 Exam Tip: When preparing a trial balance, carefully check each account's nature (asset, liability, expense, income) to correctly assign it a debit or credit balance.

Question 11. From the following balances, prepare trial balance of Baskar as on 31st March, 2017. Transfer the difference, if any, to suspense account.

Answer: The trial balance for Baskar as of March 31st, 2017, is created using the provided account balances. Any difference found between the total debits and credits is transferred to a suspense account to balance the sheet, indicating an error that needs further investigation. This helps in reconciling temporary differences.

In simple words: When the debit and credit totals don't match exactly, the difference is temporarily put into a "suspense account." This account holds the missing amount until the specific error or errors can be found and fixed.

🎯 Exam Tip: Always make sure to sum up both debit and credit columns carefully. If they don't match, investigate common errors like single-sided entries or transpositions before using a suspense account.

Question 12. From the following balances extracted from the books of Rajeshwari as on 31st March, 2017, prepare the trial balance.

Answer: The trial balance for Rajeshwari's books as of March 31st, 2017, organizes all ledger account balances into debit and credit columns. This statement acts as a preliminary check to ensure that the total debits equal the total credits, confirming the arithmetic accuracy of the bookkeeping system. A matched total suggests the double-entry system has been consistently applied.

In simple words: This financial statement lists all the balances from the ledger to ensure that the total money that has come in (credits) equals the total money that has gone out (debits). It's a fundamental check to prevent simple arithmetic errors in accounting records.

🎯 Exam Tip: Pay close attention to distinguishing between debit and credit balances for each account. Assets and expenses typically have debit balances, while liabilities, capital, and income usually have credit balances.

Question 13. Correct the following trial balance.

Answer: The provided trial balance has been corrected by identifying and reclassifying accounts to their appropriate debit or credit columns. Ensuring the double-entry principle is maintained, the total debits now accurately match the total credits, correcting any previous errors and preparing the accounts for financial statement creation. This process is crucial for presenting reliable financial information.

In simple words: Correcting a trial balance means fixing any mistakes so that the total of all debits matches the total of all credits. This step is important for making sure financial records are accurate before preparing other financial reports.

🎯 Exam Tip: When correcting a trial balance, start by re-checking each entry from the ledger to the trial balance. Errors often arise from transpositions, omissions, or posting an amount to the wrong column.

I. Choose The Correct Answer.

Question 1. Trial Balance shows arithmetical accuracy of ledger accounts, but it is not a of accuracy.
(a) Conclusive
(b) Exclusive
(c) Submissive
(d) Inclusive
Answer: (a) Conclusive
In simple words: A trial balance helps check if numbers add up correctly, but it does not guarantee that all records are perfect or that no mistakes were made in how things were recorded.

🎯 Exam Tip: Understand that a tallied trial balance only confirms arithmetic accuracy, not the complete absence of errors like errors of omission or compensating errors.

Question 2. The statement showing balance of all the ledger accounts is known as
(a) Trial balance
(b) Balance sheet
(c) Bank reconciliation statement
(d) Profit and loss account
Answer: (a) Trial balance
In simple words: The trial balance is a list that shows all the money amounts from every account in the ledger, acting as a summary of financial data.

🎯 Exam Tip: Remember that the trial balance is a summary statement, not a final financial statement, and it's a stepping stone to preparing the balance sheet and profit and loss account.

Question 3. Which of the following in Trial Balance is contradictory to each other?
(a) Inventory and Drawings
(b) Sales and Purchases returns
(c) Carriage inwards and outward
(d) Trade receivable and Liability
Answer: (d) Trade receivable and Liability
In simple words: Trade receivables mean money owed to the business (an asset), while liabilities mean money the business owes to others. These two types of accounts represent opposite financial positions.

🎯 Exam Tip: Understand the nature of each account: assets and expenses usually have debit balances, while liabilities, capital, and income typically have credit balances. Contradictory pairs often involve an asset versus a liability or income versus an expense.

Question 4. Closing stock in the Trial Balance implies that
(a) It is already adjusted in the opening stock
(b) It is adjusted in sales account
(c) It is adjusted in the purchases account
(d) None of the options
Answer: (c) It is adjusted in the purchases account
In simple words: When closing stock appears in the trial balance, it means its value has already been factored into the purchases account, usually by reducing the cost of goods available for sale. This method simplifies the final accounts preparation.

🎯 Exam Tip: If closing stock is given outside the trial balance, it is usually adjusted at the end to determine the cost of goods sold. When it's inside, it means the adjustment has already taken place against purchases.

Question 5. The preparation of trial balance is for
(a) Locating errors of commission
(b) Locating errors of principle
(c) Locating clerical errors
(d) All of the options
Answer: (d) All of the options
In simple words: A trial balance is prepared to help find different types of accounting mistakes, whether they are simple number errors (clerical), mistakes in following accounting rules (principle), or errors made by writing something incorrectly (commission).

🎯 Exam Tip: While a trial balance helps detect many errors, remember that some errors, like complete omissions or compensating errors, might not cause the trial balance to not tally.

Question 6. Which is the most popular method of preparing trial balance?
(a) Balance Method
(b) Net Asset Method
(c) Average Trial Balance method
(d) None of the options
Answer: (a) Balance Method
In simple words: The balance method is the most commonly used way to prepare a trial balance, where only the final debit or credit balance of each ledger account is listed.

🎯 Exam Tip: Be familiar with both the Balance Method and Total Method for preparing trial balances, but note that the Balance Method is more widely used because it directly feeds into financial statement preparation.

Question 7. When adjusted purchase is shown on the debit column of the trial balance then
(a) Both opening and closing stock do not appear in the trial balance
(b) Closing stock is shown in the trial balance and not the opening stock
(c) Opening stock is shown in the trial balance and not the closing stock
(d) Both opening and closing stock appear in the trial balance
Answer: (b) Closing stock is shown in the trial balance and not the opening stock
In simple words: If "adjusted purchases" are used, it means the opening stock has already been combined with net purchases, and the closing stock has been subtracted. So, only the closing stock will appear as an asset in the trial balance.

🎯 Exam Tip: When purchases are adjusted, remember that the cost of goods sold has effectively been calculated, and the remaining closing stock becomes the relevant inventory figure on the trial balance.

Question 8. A suspense account facilitates the preparation of financial statements even when the trial balance has not tallied.
(a) Cash Book
(b) Ledger
(c) Trial Balance
(d) Journal
Answer: (c) Trial Balance
In simple words: A suspense account is used to temporarily store the difference when a trial balance does not match, allowing financial statements to be prepared while errors are investigated. It acts as a temporary placeholder.

🎯 Exam Tip: The suspense account is a temporary account used to balance the trial balance while errors are being found. It should always be eliminated once all errors are located and corrected.

Question 9. Trial Balance is a statement which shows of all accounts.
(a) Debit or Credit Balances
(b) Balances and Totals
(c) Positive and Negative Balances
(d) Opening and Closing balances
Answer: (a) Debit or Credit Balances
In simple words: The trial balance lists the final debit or credit amount for every account in the ledger, showing the financial position of each account at a specific time.

🎯 Exam Tip: Each account balance (asset, liability, equity, revenue, expense) must be correctly classified as either a debit or credit, which is the core principle of a trial balance.

Question 10. All the following statements are correct except
(a) Trial balance is a statement and not an account
(b) Trial balance is prepared at the end of the year
(c) Trial balance is not a concluding proof of arithmetical accuracy
(d) Trial balance is tallied if a transaction posted twice in the ledger
Answer: (c) Trial balance is not a concluding proof of arithmetical accuracy
In simple words: While a trial balance helps check if the debits and credits match, it does not guarantee that there are no mistakes at all. Some errors, like omitting an entire transaction, will still allow the trial balance to tally.

🎯 Exam Tip: Be aware of the limitations of a trial balance; a tallied trial balance does not mean the books are entirely error-free, as certain errors do not affect the equality of debits and credits.

Question 11. Trial balance of a trader shows the following balances: Opening Inventory Rs.9600; Purchases less returns Rs.11850; Salaries Rs.3200; Wages Rs.750; Commission on purchases Rs.200; Carriage outwards Rs.300; Sales Rs.24900; Closing Inventory Rs.3500; Carriage on purchases Rs.1000; Gross profit will be.
(a) Rs. 5,000
(b) Rs. 6,500
(c) Rs. 3,250
(d) Rs. 3,200
Answer: (a) Rs. 5,000
In simple words: Gross profit is calculated by subtracting the cost of goods sold from the total sales. The cost of goods sold includes opening inventory, purchases (minus returns), and direct expenses related to buying goods, then subtracting the closing inventory.

🎯 Exam Tip: Remember the formula for Gross Profit: Sales - Cost of Goods Sold. Cost of Goods Sold = Opening Stock + Net Purchases + Direct Expenses - Closing Stock.

Question 12. Trial Balance is a
(a) Real account
(b) Nominal account
(c) Personal account
(d) Statement
Answer: (d) Statement
In simple words: A trial balance is a list or summary document, not an account itself. It helps check the accuracy of accounts by ensuring debits and credits match.

🎯 Exam Tip: Always distinguish between an 'account' (like a ledger account which has debits and credits) and a 'statement' (like a trial balance or balance sheet which summarizes accounts).

Question 13. Bank account will show balance.
(a) Debit
(b) Credit
(c) Debit (or) Credit
(d) None of the options
Answer: (a) Debit
In simple words: A bank account typically has a debit balance, which means the business has money in the bank. This money is an asset for the business.

🎯 Exam Tip: While a bank account typically shows a debit balance (an asset), remember that a bank overdraft (when the business owes money to the bank) would be represented as a credit balance.

Question 14. Which of the following will affect the agreement of a trial balance?
(a) Complete omission of a transaction
(b) Partial omission of a transaction
(c) Error of principle
(d) Compensating errors
Answer: (b) Partial omission of a transaction
In simple words: If only one part of a transaction (either the debit or the credit) is missed, the total debits will no longer match the total credits, causing the trial balance to not agree.

🎯 Exam Tip: Errors that affect only one side of an entry (like partial omission or posting to the wrong side) will cause the trial balance to not tally. Errors that affect both sides equally (like complete omission or compensating errors) will not make it disagree.

Question 15. Trial balance is prepared to find out the
(a) Profit
(b) Loss
(c) Financial position
(d) Arithmetical accuracy of the accounts
Answer: (d) Arithmetical accuracy of the accounts
In simple words: The main purpose of making a trial balance is to check if all the numbers in the ledger accounts have been added and balanced correctly, meaning debits and credits are equal.

🎯 Exam Tip: Remember that while a trial balance is a step towards determining profit/loss and financial position, its direct objective is to verify the mathematical correctness of ledger balances.

Question 16. Suspense account in the trial balance is entered in the
(a) Trading A/c
(b) Profit and loss A/c
(c) Balance sheet.
(d) None of the options
Answer: (c) Balance sheet.
In simple words: A suspense account balance, if not resolved by the end of the accounting period, is shown on the balance sheet as an asset (if debit balance) or a liability (if credit balance) until the errors are found.

🎯 Exam Tip: The suspense account is a temporary account. Its balance is shown on the balance sheet to complete the financial statements, but it must be resolved in the next period once errors are identified.

Question 17. Suspense account having credit balance will be shown on the
(a) Credit side of the profit and loss A/c
(b) Liabilities side of the balance sheet
(c) Assets side of the balance sheet
(d) Debit side of the profit and loss A/c
Answer: (b) Liabilities side of the balance sheet
In simple words: If a suspense account has a credit balance, it means the business has more credits than debits due to an error. This credit balance is treated as a temporary liability and listed on the liabilities side of the balance sheet.

🎯 Exam Tip: Remember that a credit balance generally indicates a liability or income, so an unresolved credit balance in a suspense account would appear on the liabilities side of the balance sheet.

Question 18. Suspense account having debit balance will be shown on the
(a) Credit side of the profit and loss A/c
(b) Liabilities side of the balance sheet
(c) Assets side of the balance sheet
(d) Debit side of the profit and loss A/c
Answer: (c) Assets side of the balance sheet
In simple words: If a suspense account has a debit balance, it means the business has more debits than credits due to an error. This debit balance is shown as a temporary asset on the assets side of the balance sheet.

🎯 Exam Tip: A debit balance usually represents an asset or expense, so an unresolved debit balance in a suspense account should be placed on the assets side of the balance sheet.

Question 19. While preparing the trial balance, the accountant finds that the total of the debit column is short by Rs. 1,000. This difference will be
(a) Debited to suspense account
(b) Credited to suspense account
(c) Adjusted to any of the debit balance
(d) Adjusted to any of the credit balance
Answer: (a) Debited to suspense account
In simple words: If the debit side of the trial balance is less than the credit side, it means there is a missing debit. To make the totals match temporarily, the suspense account is debited with the missing amount.

🎯 Exam Tip: Remember that a suspense account is debited when the debit column is short, and credited when the credit column is short, always balancing the temporary difference.

Question 20. The preparation of trial balance is the step in the accounting process.
(a) first
(b) second
(c) third
(d) fourth
Answer: (c) third
In simple words: The accounting process generally starts with recording transactions (journalizing), then posting them to ledgers, and finally preparing the trial balance to check for accuracy.

🎯 Exam Tip: The typical sequence is Journal (original entry), Ledger (classification), Trial Balance (summary and check), and then Final Accounts (financial statements).

Question 21. When double entry system is followed, the totals of the debit and the Credit columns of the trial balance must be
(a) Equal
(b) unequal
(c) Excess
(d) Short
Answer: (a) Equal
In simple words: The fundamental rule of double-entry accounting is that for every debit, there must be an equal and opposite credit. This ensures that the total of all debit balances always matches the total of all credit balances in the trial balance.

🎯 Exam Tip: The equality of debits and credits is the cornerstone of the double-entry system. If a trial balance does not tally, it indicates an error in recording or posting transactions.

Question 22. The account which has a credit balance and is shown in the debit column of the trial balance is
(a) Sundry debtors account
(b) Bills receivable account
(c) Purchases account
(d) Capital account
Answer: (d) Capital account
In simple words: The Capital account represents the owner's investment in the business and typically has a credit balance. Sundry debtors, bills receivable, and purchases usually have debit balances.

🎯 Exam Tip: Know the normal balance type for core accounts: Assets and Expenses have debit balances; Liabilities, Capital, and Income have credit balances.

Question 23. Which one of the following represents the correct sequence of the accounting cycle?
(a) Journal > Trial balance > Ledger > Transaction
(b) Transaction > Journal > Ledger > Trial balance
(c) Purchases > Journal > Ledger > Trial balance
(d) None of the options
Answer: (b) Transaction > Journal > Ledger > Trial balance
In simple words: The accounting process begins with a business event (transaction), which is first recorded in the journal, then organized into ledger accounts, and finally summarized in a trial balance.

🎯 Exam Tip: Memorize the core steps of the accounting cycle: identify transaction, journalize, post to ledger, prepare trial balance, adjust entries, prepare financial statements, close books.

Question 24. Which one of the following is the most popular method of preparing a trial balance?
(a) Total method
(b) Balance method
(c) Trial and error method
(d) Line method
Answer: (b) Balance method
In simple words: The balance method is the most common way to create a trial balance, as it directly uses the final debit or credit amount from each account to show a clear summary.

🎯 Exam Tip: While the Total Method can also be used, the Balance Method is generally preferred because it presents the net balances that are directly used in preparing final financial statements.

II. Very Short Answer Type Questions

Question 1. What are the features of Trial Balance?
Answer: A trial balance is a key tool in accounting, and it has several important features:
1. It lists the balances from all ledger accounts.
2. It is prepared for a specific date, often shown with "as on..." at the top. This captures the financial state at that exact moment.
3. When the double-entry system is correctly followed, the total of all debit columns must be equal to the total of all credit columns.
4. If there is any difference between the total debits and credits, it signals that errors have been made somewhere in the accounting records.
5. Even if the debit and credit totals match, it doesn't guarantee that there are no mistakes, as certain errors might not affect the equality of the two columns.
In simple words: A trial balance is a snapshot of all account balances on a certain day. It checks if debits match credits, but it can't find every single mistake.

🎯 Exam Tip: For descriptive answers on features, ensure you cover its nature (statement, not account), purpose (arithmetic check), timing (specific date), and limitations (doesn't reveal all errors).

Question 2. What are the limitations of trial balance?
Answer: Although a trial balance is a useful tool, it has certain limitations:
1. It can only be prepared by organizations that follow the double-entry accounting system.
2. A trial balance might still tally even if some errors exist in the accounting records, like when a whole transaction is completely missed (omitted).
3. It can also tally even if other types of errors, such as compensating errors where one mistake cancels out another, have been made.
4. If the trial balance is not prepared carefully and systematically, the final financial statements created from it might not accurately show the business's actual financial health.
5. Simply because a trial balance agrees does not mean all entries are arithmetically correct, as errors like complete omissions, compensating errors, and errors of principle are not disclosed by it.
In simple words: A trial balance can't catch all mistakes, especially if an entire transaction is missing or if one mistake cancels another out. It's only a partial check.

🎯 Exam Tip: Always list specific types of errors (omission, compensating, principle) that a trial balance fails to disclose when asked about its limitations.

Question 3. State whether the balance of the following accounts should be placed in the debit or the credit column of the trial balance:
(i) Opening Stock
(ii) Bank Loan
(iii) Provision for Bad debts
(iv) Good will
Answer: The classification of these account balances into debit or credit columns in a trial balance depends on whether they represent assets, expenses, liabilities, income, or capital. Assets and expenses generally have debit balances, while liabilities, income, and capital generally have credit balances. Goodwill, as an asset, is an example of an intangible asset that has a debit balance.

In simple words: Accounts like opening stock and goodwill usually show up on the debit side because they are assets. Bank loans and provisions for bad debts are liabilities, so they appear on the credit side.

🎯 Exam Tip: Always recall the basic accounting rule: assets and expenses are debits, while liabilities, capital, and revenues are credits. This fundamental rule helps correctly place items in a trial balance.

III. Short Answer Questions

Question 1. What is a Suspense Account?
Answer: A Suspense Account is a temporary account used in bookkeeping. It holds amounts that cause a trial balance to not match. This account is used for unclassified or disputed funds and expenses until the specific errors are identified and corrected. It helps in completing financial statements on time, even when some minor errors are still being investigated.
In simple words: A suspense account is a temporary place for money that doesn't fit anywhere else in the accounts, until we figure out where it truly belongs.

🎯 Exam Tip: Remember that a Suspense Account is always temporary and must be cleared once the errors causing the imbalance are found and rectified.

Question 2. What are the steps to be followed to prepare trial balance under Balance method?
Answer: Under the Balance method, preparing a trial balance involves several key steps:
Step 1: First, calculate the final balance for every ledger account, including the cash book. This means finding out if each account has a debit or a credit balance.
Step 2: Next, list all these accounts in a 'Particulars' column. Then, record their debit balances in the 'Debit Balance' column and their credit balances in the 'Credit Balance' column.
Step 3: For each account, write down the page number from the ledger where its balance was taken, in the 'Ledger Folio' (L.F.) column. This helps track where the information came from.
Step 4: Finally, add up all the amounts in the 'Debit Balance' column and all the amounts in the 'Credit Balance' column. These two totals must be equal. If they are not, it means there are errors, and those errors need to be found and fixed so the trial balance matches. A trial balance helps ensure the mathematical accuracy of your bookkeeping records.
In simple words: To make a trial balance by the balance method, first find the final balance for every account. Then, list them all, putting debit balances on one side and credit balances on the other. Add up both sides; they should be equal.

🎯 Exam Tip: The core purpose of the Balance Method is to verify the arithmetic accuracy of ledger balances and provide a concise summary for preparing final accounts.

Question 3. State whether the balance of each of the following accounts should be placed in The debit or the credit column of the trial balance:
(1) Sundry debtors
(2) Sundry creditors
(3) Cash in hand
(4) Bank overdraft
(5) Salary
(6) Discount allowed
(7) Plant and machinery
(8) Furniture
(9) Commission earned
(10) Reserve Fund
Answer:

🎯 Exam Tip: A clear understanding of the accounting equation (Assets = Liabilities + Capital) and the normal balance of each account type is crucial for correctly preparing a trial balance.

Question 4. What are the advantages of a Trial Balance?
Answer: A trial balance offers several key benefits in accounting:
1. It helps check if the mathematical calculations in the accounting books are correct. By listing all debit and credit balances, it ensures that the totals match.
2. It provides a quick and easy summary of all the ledger account balances in one document. This makes it simple to see the current financial standing of each account.
3. If there are any arithmetic errors, preparing a trial balance helps to find them. These errors can then be fixed before the final financial reports are created.
4. It serves as the foundation for making the final financial statements, like the income statement and balance sheet. These final accounts give a full picture of the business's performance and position.
In simple words: A trial balance checks if your math is right, gives a summary of all accounts, helps find mistakes, and is the first step to making your company's final money reports.

🎯 Exam Tip: Always highlight the dual aspects of a trial balance: as a tool for arithmetical accuracy and as a foundational document for financial statement preparation.

Specimen of Trial Balance

IV. Exercises

Question 1. From the following list of balances, prepare a trial balance as on 31.3.2017.
Answer:
Given Balances (as on 31.3.2017):
Capital: Rs. 1,00,000, Drawings: Rs. 18,000, Motor van: Rs. 25,000, Interest paid: Rs. 900, Purchases: Rs. 75,000, Wages: Rs. 3,000, Commission received: Rs. 7,500, Bank Balance: Rs. 20,000, Buildings: Rs. 15,000, Furniture: Rs. 7,500, Loan from A: Rs. 15,000, Sales: Rs. 1,00,000, Stock: Rs. 25,000, Salaries: Rs. 15,000, Debtors: Rs. 28,100, Creditors: Rs. 10,000.

Trial Balance as on 31.3.2017

🎯 Exam Tip: When preparing a trial balance, always classify accounts as assets, liabilities, expenses, revenues, or capital to determine their natural debit or credit balance.

Question 2. Prepare trial balance from the following:
Answer:
Given Balances:
Capital: Rs. 75,000, Buildings: Rs. 42,000, Bills payable: Rs. 9,000, Loan to Rajan: Rs. 25,000, Bad debts: Rs. 2,000, Sales: Rs. 1,25,000, Interest (Cr): Rs. 5,000, Stock: Rs. 30,000, Purchases: Rs. 50,000, Salaries: Rs. 10,000, Wages: Rs. 3,000, Debtors: Rs. 40,000, Cash: Rs. 12,000.

Trial Balance

🎯 Exam Tip: When an account is marked "(Cr)" like "Interest (Cr)", it explicitly indicates a credit balance, which simplifies its placement in the trial balance.

Question 3. From the following details prepare Trial Balance:
Answer:
Given Balances:
Capital: Rs. 40,000, Buildings: Rs. 6,000, Bills Receivable: Rs. 8,000, Furniture: Rs. 6,500, Bills Payable: Rs. 15,900, Machinery: Rs. 8,000, Interest paid: Rs. 350, Debtors: Rs. 30,000, Discount allowed: Rs. 2,100, Creditors: Rs. 7,850, Discount received: Rs. 1,200, Rent received: Rs. 5000, Bank Balance: Rs. 4,000, Commission paid: Rs. 5000.

Trial Balance

🎯 Exam Tip: Pay close attention to items like "Interest (Cr)" or "Discount (Cr)" in the input, as these explicitly indicate credit balances, representing income received.

Question 4. The following are the balances extracted from the books of Mr.M as on 31st December, 2017. Prepare Trial Balance.
Answer:
Given Balances:
Capital: Rs. 20,000, Buildings: Rs. 20,000, Sundry creditors: Rs. 6,000, Rent and Rates: Rs. 300, Purchase Returns: Rs. 750, Loan to R: Rs. 1,000, Bad debts: Rs. 350, Cash at Bank: Rs. 8,000, Sundry Debtors: Rs. 8,000, Wages: Rs. 1,700, Sales: Rs. 96,000, Carriage: Rs. 200, Salaries: Rs. 600, Cash in hand: Rs. 5,000, Stock on 1.1.2017: Rs. 3,000, Commission paid: Rs. 700, Purchases: Rs. 60,000, Furniture and Fixtures: Rs. 1,600, Discount allowed: Rs. 50, Drawings: Rs. 5,000, Machinery: Rs. 6,000, Repairs: Rs. 400, Insurance Premium: Rs. 300, Sales Returns: Rs. 400, Telephone charges: Rs. 250, Discount earned: Rs. 100.

Trial Balance of Mr.M as on 31.12.2017

🎯 Exam Tip: Remember that 'Opening Stock' is an asset, 'Sales Returns' are contra-revenue (debit), and 'Purchase Returns' are contra-expense (credit) in the trial balance.

Question 5. The following balances were extracted from the ledger of Shri Prasad on 31st March 2017. You are required to prepare a trial balance as on that date in proper form.
Answer:
Given Balances:
Drawings: Rs. 6,000, Capital: Rs. 24,000, Sundry Creditors: Rs. 43,000, Bills payable: Rs. 4,000, Sundry debtors: Rs. 50,000, Bills Receivable: Rs. 5,200, Loan from Kathir: Rs. 10,000, Furniture & Fixtures: Rs. 4,500, Opening Stock: Rs. 47,000, Cash in Hand: Rs. 900, Tax: Rs. 3,500, Sales: Rs. 1,28,000, Salaries: Rs. 9,500, Sales Returns: Rs. 1,000, Purchase Returns: Rs. 1,100, Travelling expenses: Rs. 4,600, Commission paid: Rs. 100, Trading expenses: Rs. 2,500, Discount earned: Rs. 4,000, Rent: Rs. 2,000, Bank Overdraft: Rs. 6,000, Purchases: Rs. 70,800.

Trial Balance of Shri Prasad as on 31.3.2017

🎯 Exam Tip: When accounts like 'Cash at Bank' appear in the solution but not explicitly in the initial list, it means such general accounts are part of the overall financial standing and should be included with their correct balance type to tally the trial balance.

Question 6. Prepare Trail Balance.
Answer:
Given Balances:
Opening stock: Rs. 10,600, Carriage: Rs. 200, Purchases: Rs. 12,000, Trade expenses: Rs. 580, Plant: Rs. 2,600, Cash in hand: Rs. 200, Debtors: Rs. 3,000, Drawings: Rs. 700, Sales: Rs. 25,200, Capital: Rs. 7,000, Loan (Cr): Rs. 1,400, Wages: Rs. 2,200, Commission (Dr): Rs. 300, Returns inwards: Rs. 440, Rent: Rs. 200, Repairs to plant: Rs. 460, Cash at bank: Rs. 1,000, Income tax: Rs. 500, Returns outwards: Rs. 150, Discount received: Rs. 400, Creditors: Rs. 830.

Trial Balance

🎯 Exam Tip: Note how "Loan (Cr)" and "Commission (Dr)" explicitly specify the balance type, guiding their placement in the trial balance directly.

Question 7. Redraw correctly the trial balance given below:
Answer:
Incorrect Trial Balance provided:
Debit: Capital Rs. 8,000, Bad debts recovered Rs. 250, Creditors Rs. 1,250, Returns outwards Rs. 350, Bank overdraft Rs. 1,570, Rent Rs. 360, Salaries Rs. 850, Postage Rs. 300, Cash in hand Rs. 210, Opening stock Rs. 2,450, Purchases Rs. 11,870.
Credit: Debtors Rs. 7,580, Bank deposit Rs. 2,750, Discount allowed Rs. 40, Drawings Rs. 600, Returns inwards Rs. 450, Sales Rs. 14,690, Bills payable Rs. 1,350, Electricity charges Rs. 200.

Corrected Trial Balance

🎯 Exam Tip: When correcting a trial balance, systematically review each account to ensure it's on its correct side (debit for assets/expenses, credit for liabilities/income/capital), as common errors involve misplacing accounts.

Question 8. From the following list of balances, prepare Trial Balance:
Answer:
Given Balances:
Capital: Rs. 1,00,000, Debtors Account: Rs. 20,000, Fixed assets account: Rs. 92,000, Sales account: Rs. 1,10,000, Returns outward account: Rs. 1,000, Bills Payable Account: Rs. 8,000, Bank overdraft account: Rs. 11,000, Opening stock account: Rs. 15,000, Creditors account: Rs. 20,000, Purchase account: Rs. 70,000, Returns inward account: Rs. 2,000, Wages and Salaries account: Rs. 30,000, Bills Receivable account: Rs. 15,000, Rent account: Rs. 6,000.

Trial Balance

🎯 Exam Tip: Remember that returns outward (purchase returns) typically have a credit balance, reducing the cost of purchases, while returns inward (sales returns) have a debit balance, reducing sales revenue.

Question 9. State whether the balances of the following accounts should be placed in debit column or credit column of the trial balance.
Answer:
The balances of the accounts are placed in the trial balance as follows:

🎯 Exam Tip: Assets (Plant & Machinery, Furniture, Cash in Hand, Sundry Debtors) and Expenses (Salary, Discount allowed, Carriage Inward, Carriage Outward, Purchases, Interest paid) are always debits in a trial balance.

Question 9. State whether the balances of the following accounts should be placed in debit column or credit column of the trial balance.
Answer: When preparing a trial balance, accounts are grouped into debit or credit columns based on their normal balance. Assets and expenses usually have debit balances, while liabilities, capital, and revenues usually have credit balances. This ensures that the total debits match the total credits, which is a key principle of double-entry accounting.

Answer:

In simple words: Accounts like assets and expenses go on the debit side, while liabilities, capital, and income go on the credit side. This helps ensure the bookkeeping records are balanced.

🎯 Exam Tip: Remember the basic accounting equation: Assets = Liabilities + Equity. This helps determine if an account's normal balance is a debit or a credit.

Question 10. From the under mentioned balances extracted from the books of a sole trader on 31st December. Prepare a Trial Balance as on 31st December, 2017.
Answer: To prepare a trial balance, list all the ledger account balances and put them in either the debit or credit column. Assets and expenses will have debit balances, while liabilities, capital, and revenue will have credit balances. The total of both columns should match to show arithmetical accuracy. The financial position can be easily understood when the balances are organized in this way.

Solution:

In simple words: This table correctly sorts all the money figures into two columns, debit and credit. When both columns add up to the same number, it shows that the financial records are balanced.

🎯 Exam Tip: Always double-check that every account balance is placed in the correct debit or credit column to ensure the trial balance tallies, as an incorrect placement will cause a discrepancy.

Question 11. Prepare trial balance as on 31.12.2000 From the followings balances of Mr. Kishore Kumar
Answer: Preparing a trial balance involves listing all the ledger account balances on a specific date, separating them into debit and credit columns. If the totals of both columns are equal, it indicates the mathematical accuracy of the entries. This process is crucial for preparing the final financial statements. Here, for Mr. Kishore Kumar, the trial balance for 2000 is prepared as follows.

Solution:

In simple words: This trial balance for Mr. Kishore Kumar correctly lists all accounts with their debit or credit balances, and the total amounts match. This confirms that all transactions were recorded properly.

🎯 Exam Tip: When given many balances, systematically go through each account and assign it to either the debit or credit column based on its nature (asset, liability, equity, revenue, expense). This reduces errors and ensures the trial balance tallies.

Question 12. The following balances are extracted from the books of Mr. Anbu. Prepare trial balance as on 30.6.2004.
Answer: To create a trial balance, all account balances from the ledger are listed, categorizing them as either debits or credits. This helps verify the mathematical accuracy of the double-entry accounting system. It is important to ensure that assets and expenses have debit balances, while liabilities, equity, and income accounts have credit balances. For Mr. Anbu, the trial balance for 2004 is presented below.

Solution:

In simple words: All the money details for Mr. Anbu are correctly put into a list where total debit equals total credit. This simple check helps make sure all the numbers add up correctly.

🎯 Exam Tip: When preparing a trial balance, always check the original classification of accounts (asset, liability, equity, revenue, expense) to determine if they should have a debit or credit balance, which is vital for accuracy.

Question 13. Prepare Trial Balance as on 31.3.2004 From the books of Mr. Praveen
Answer: A trial balance is prepared by listing all general ledger accounts, whether debit or credit, on a single sheet. This is done to ensure that the sum of all debit balances equals the sum of all credit balances, indicating that the accounting records are arithmetically correct. For Mr. Praveen's books, the trial balance for 2004 is detailed below.

Solution:

In simple words: This trial balance for Mr. Praveen shows that all the debit and credit totals are the same. This means the accounting books are balanced, which is a good sign for financial record-keeping.

🎯 Exam Tip: Pay close attention to accounts like 'Loan (Cr.)' which explicitly state their balance type (Credit). Such labels are crucial for correctly classifying them in the trial balance.

Question 14. Prepare trial balance as on 31.12.2002. From the followings balance of Mr. Ram Prasanth.
Answer: A trial balance is a list of all accounts from the ledger, showing their debit or credit balances on a specific date. The main goal is to check if the total debits equal the total credits, which confirms the arithmetical accuracy of the bookkeeping entries. For Mr. Ram Prasanth, the trial balance for 2002 is given below. This helps in easily preparing other financial statements.

Solution:

In simple words: This trial balance ensures that all the debits and credits from Mr. Ram Prasanth's accounts balance out. This is a crucial step to confirm that all financial entries have been correctly recorded.

🎯 Exam Tip: When preparing a trial balance, remember that an opening stock balance will always be a debit, as it represents an asset at the beginning of the period.

Question 15. From the extracats of Mr.Keerthivasan books of accounts prepare Trail balance as on 31.03.94.
Answer: A trial balance lists all account balances from the ledger, showing them as either debits or credits. This process helps verify the arithmetic accuracy of the accounting records by ensuring that total debits equal total credits. For Mr. Keerthivasan, the trial balance for 1994 is detailed below. Any difference between the totals would indicate an error that needs to be located and corrected.

Solution:

In simple words: This trial balance for Mr. Keerthivasan confirms that all recorded debit and credit transactions add up equally. The suspense account helps to temporarily balance the trial balance if there's an unknown difference, until the error can be found and fixed.

🎯 Exam Tip: When a trial balance does not immediately tally, a suspense account is used to temporarily balance it. Remember to always categorize the suspense account balance correctly as a debit or credit to ensure the totals match, and highlight it as a pending item for error rectification.

Question 16. The Following details have been extracted from Mr. Kirubakaran books of accounts as on 31.12.98.
Answer: A trial balance lists all ledger accounts and their balances to ensure that total debits match total credits. This step confirms the arithmetical accuracy of the financial records and is vital before preparing final financial statements like the income statement and balance sheet. For Mr. Kirubakaran, the trial balance for 1998 is provided below.

Solution:

In simple words: This table clearly shows all of Mr. Kirubakaran's account balances for 1998, with the total debits matching the total credits. This means the accounts are balanced. The suspense account helps in tallying the trial balance when there's a temporary unknown difference.

🎯 Exam Tip: When adjusting for a suspense account, ensure that its balance is recorded in the column (debit or credit) that makes the trial balance total match. This temporary entry is removed once the underlying errors are found and corrected.