Hey guys, the name of the chapter is Trial Balance
We will try and see whether the balance is matching or not
In the accounting cycle, this is the third stage
Journal, then ledger, then trial balance
This is the third stage, trial balance
Look, we summarized the journal entries and made a ledger
We collect all the accounts in the journal entries and make
a single account
For example, cash account, bank account, purchase account
Wherever there is a cash account in the journal entry, we
will collect it and post it in the same account
We will make a summary of it in the same place
By doing this, we can make a lot of ledgers and accounts
When the summary of accounts is made, when the summary of
ledgers is made, it is called trial balance
That is called trial balance, my dear friends
Through an example, you will understand how trial balance
is made
Let's move to the writing pad
Let's start writing
Sir, show me the pad
Here is the pad
Write the example
Ex-Ltd. had the following transactions during April 2023
Ex-Ltd. had the following transactions 1.
Capital invested in the bank account of business
2. Goods purchased 3.
Payment made by cheque 4.
Cash withdrawn from bank 5.
Paid salary in cash
Write them down quickly
I have written it
Let's get their journal entries done
First of all, get the journal entries of all four
What will be the first journal entry? 1.
Bank account debit to capital account 1 lakh 2.
Goods purchased 3.
Payment made by cheque 4.
Purchase account debit to bank account 5.
Cash withdrawn from bank account 6.
Credit to bank account 7.
Salary debit to cash account
Now I have to prepare the ledgers
Sir, which ledgers will be made? 1.
Bank 2.
Capital 3.
Purchase 4.
Cash 5.
5. Bank 6.
Capital 7.
Purchase 8.
Let's get their ledgers done
I am not writing debit and credit on both sides
You know that on both sides of the account
One side is debit and one side is credit
I am not writing
I want to present the photo on the same page
That's why I am doing this
Ok sir
Friends, look here
Bank account debit
How is the posting?
Bank account debit is 1 lakh
So, I will write debit side in bank account 1 lakh
Capital account credit is 1 lakh
So, I will write credit side in capital account 1 lakh
I will write name of capital in bank account 2 capital
I will write name of capital in bank account 2 bank
This is how ledgers are made
2nd Entry
Purchase account debit is 40,000
So, debit side in Purchase account is 40,000
Bank credit is 40,000
So, credit side in Bank is 40,000
Name of Purchase in Bank is 2 Purchase
Name of Bank in Purchase is 2 bank
To Bank
Cash Account
Debit Debit Bank Credit Bank By Cash
Cash To Bank
Salary Debit Cash Debit Salary To Cash
By Salary 10,000
Balance the accounts
We have to balance
In Bank Account
Debit side is 1 Lakh
Credit side is 60,000
Debit side is 1 Lakh
Credit side is 60,000
Out of 1 Lakh 60,000 goes to 40,000
What will be left? 40,000 of Debit
Why? Out of 1 Lakh of Debit 60,000 of Credit will be left
Debit will be left 40,000 of Debit
Which side will you write?
Credit side
If Debit balance is left
Why will you write Credit side?
Because we have to balance both sides
Credit side was less than 40,000
If you write Credit side 40,000 Both sides will be 1 Lakh
This is Bank Account 10
Closing Balance of Bank Account is 40,000
Remember It is written on Credit side
But in reality
It is Debit
Yes Sir
In Capital Account
Credit side is 1 Lakh
Debit side is 0
Out of 1 Lakh 1 Lakh will be left
Credit or Debit?
Credit and big figure is of credit
yes sir, big figure is of credit
so this is 1 lakh balance of credit but we will write on
debit side because then both sides will be equal 1 lakh of
capital account
if you write credit side of credit balance then credit side
will be 2 lakhs and debit side will be 0
so it will be 4 times 2, so it will be 16 times 32 so it
will be 16 times 32 now come to purchase account debit side
40, credit side nothing so write credit side 42, so it will
be 40,000 cash account, debit side 20,000, credit side
10,000 so from debit side, credit side 10,000 is gone so
debit side 10,000 is left so where will we write debit side
10,000
credit side 10,000, debit side 20,000 and if credit side is
empty in salary then buy CD will be 10,000 we have taken
closing balance of all accounts
now listen, first step is journal yes second step is ledger
yes now comes trial balance what we do in trial balance
there are two benefits of trial balance
first, it makes summary of all accounts in ledger and
second, it checks arithmetical accuracy that till now you
have made journal entry and ledger, there is no
arithmetical error that's why trial balance is made it has
two benefits, let's see how it is made and how it gives two
benefits let's see it now
I said, trial balance will make summary of all accounts it
will make summary of all accounts this is the format above
is trial balance and period here is particulars, here is
debit balance and here is credit balance all the accounts
are written bank, capital, purchase
cash and salary bank, capital, purchase, cash and salary
write balance of all these bank balance was 40,000 credit
side was written, but in reality it was debit balance
that's why in trial balance, debit side will be written in
capital, written debit side is 100,000 but credit side is
100,000 in purchase, it is written on credit, but debit
side is 40,000
in salary, it is written on credit, but debit side is
10,000 in salary, it is written on credit, but debit side
is 10,000 like this you have to check balance of any
account you have to check balance of cash you have to check
bank balance you have to check salary like this ledger book
is very good
if you have taken a lot of transactions you will get 5000
transactions and then ledger book will be very big if you
want to know balance of cash, purchase, salary bank you
have to open that book and check page number trial balance
will write balance of all accounts it will make summary of
all accounts any balance you can check by coming from trial
balance this is the first benefit second benefit what was
told you sir you told second benefit that it checks
arithmetical accuracy what is that sir?
check total of both sides credit is 1 lakh and debit is 40
40 80 10 90 and 10 1 lakh this is also coming 1 lakh means
friends if your trial balance is coming equal to credit and
debit then this is a sign that your accounting is correct
it is correct sir if there was any mistake in our
accounting then would this trial balance tell you? yes, see
for example
I will give you one example and I will write here in green
color pen sir suppose
I get 1 0 less then our last entry was salary account debit
to cash account 10,000 10,000 suppose it is human mistake
I wrote debit 10,000 in salary account
I would have written 1000 in cash account what would I have
written in cash account? 1000, 1 0 would have been less
than that so here I would have written 1000 in cash account
so when we do posting then what happens? debit is 10,000 in
salary account so in salary account debit side would have
written 10,000 but by giving 1000 credit in cash credit
side would have written 1000 instead of 10,000 only and
only 1000 what would have been the balance of my cash? sir
then when we balance cash account
debit side 20,000 and credit side only 1000 20 minus 1
balance would have been 19,000 not 10,000 balance would
have been 19,000 and below when we make trial balance then
there also instead of 10,000 we would have written 19,000
instead of 10,000 we would have written 19,000 what would
have been the result? total of debit side 40, 40, 80, 90,
1,09,000 total of debit side 1,09,000 and credit side only
1,00,000 as soon as trial balance mismatch bell started
ringing something is wrong something is wrong then we will
check 1000 instead of 10,000 then in cash account 10 then
balance instead of 19 10 then in trial balance also cash
instead of 19 10 then both sides would have been 1,00,000
sir will we do so many cutting? no
we do not have to do cutting we take support of suspense
account which will be taught in rectification of errors do
not go too far it will be explained in rectification ok sir
so sir this trial balance gives 100% guarantee that any
mistake will be caught no trial balance gives absolute
assurance it is not like that trial balance gives only
reasonable assurance
it does not catch 100% error it will catch 99% error it
does not catch 1% trial balance sir give an example for
example you would have written 1000 in both places in
reality you have paid salary of 10,000 suppose you would
have written 1000 in both places now I will write in pink
pen here also 1000 here also 1000 so what was the debit
side in salary account? 1000 and what was the credit side
in cash account? 1000 what was the balance of credit side?
19,000 debit side 1000 so what was the
of credit side? 1000 yes sir when you come down how much
you would have written in cash account? 19,000 and how much
you would have written in salary? 1000 total is 1,00,000
and credit side also 1,00,000 this time it is a match even
though there is a mistake the bell did not ring if the
mistake is like this that you have made a mistake with
equal value in debit and credit then you will not be able
to catch trial balance you should have written debit in
salary 20,000 you have written it as 1,000
19,000 you have dropped the debit but at the same time you
had to write credit in cash 20,000 so you have dropped the
credit also from 19,000 so what will happen in this case?
trial balance will remain a tally trial balance will remain
a tally trial balance will remain a tally ok so what is
trial balance? it is a summary of ledger balances why it is
made? to check the arithmetic accuracy does it tell 100%
error? no, it does not what is the way to avoid cutting?
suppose trial balance is
how will you correct cutting? this was the entire
discussion of trial balance with you all what is written in
notes of trial balance?
when posting of all transactions into ledger is completed
and accounts are balanced then each balance of each account
is put on a list called trial balance every account's
balance is written in one place which is called trial
balance then definition is written, no need to remember ok
steps are written first write debit side of ledger write
credit side of credit balance then total of both if total
is matching then it is ok if not matching then it is an
error all these things are written and
how will you know which account has debit balance which
account has credit balance if credit side is written in
account then it is debit side and if debit side is written
in account then it is credit side if credit side is written
in account then it is trial balance what is the objective
of trial balance? it tells about arithmetical accuracy it
helps in correcting errors it makes summary of accounts
What is the next step of Trial Balance?
Final Accounts, Trading P&L & Balance Sheet
If Trial Balance is ready, then we can proceed further
Yes Some examples of Debit & Credit Balance are written
What are they?
After that, you have to see
We have a discussion of Suspense Account
We will not teach you in this chapter
We will teach you in the chapter of Rectification
The whole discussion of Suspense Account is there
In the chapter of Rectification of Error
What is it? Why? How?
When does it open? When does it close?
It is not a part of Trial Balance
But it is written here
Because when we read Suspense Account in Rectification
Then somewhere
We need to open the Suspense Account in Trial Balance
That's why it is written here in the notes
Whereas this part is of Rectification of Error
It will be taught there in full detail
Thank you for watching
Bye Bye
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