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Refer the data given below −Name of accountAmount (in rupees)Name of accountAmount (in rupees)Cash in hand18500Supplies2500Accounts receivable5500Revenue fee18000Accounts payable2000Note payable8500Revenue (unearned)1500Common stock9000Furniture and fitting5000Machinery7500SolutionGiven below is the trial balance by using balances method −     ABC ltd       28/02/2001Sr.NoAccount titleLedger folioBalancedebitCredit1Cash 18500 2Supplies 2500 3Account receivables 5500 4Revenue (Fee)  180005Account Payable  20006Note payable  85007Unearned revenue  15008Common stock  90009Furniture and fitting 5000 10Machinery 7500 Total39003900

This is the most commonly used method for preparing a trial balance. In this method, closing balances are tabulated in two separate statements. All the credit balances are recorded in the credit column and all the debit balances are recorded in the debit column. Both balances are then tallied.FormatThe format to prepare a trial balance is as follows −Title       DD/MM/YYYYAccount numberAccount titleLedger folioBalancedebitCredit          Total  Here, Title − Name of the company.DD/MM/YYYY − Trial balance prepared Date, Month and Year.Sl. No − Ledger account number (serial numbers).Name of account − Full account name of ledger account.Ledger folio − Page number of ledger balance of accounts.Debit − ... Read More

The format of trial balance is as follows −Title      DD/MM/YYYYAccount numberAccount titleLedger folioBalancedebitCredit          Here, Title − Name of the company.DD/MM/YYYY − Trial balance prepared Date, Month and Year.Account number − Ledger account (serial numbers).Account title − Full account name of ledger account.Ledger folio − Page number of ledger balance of accounts.Debit − Debit balance.Credit − Credit balance.Balances records in the debit column includes the following −Assets − Trademarks, goodwill, stock, accounts receivables, land, leasehold property, building, investments, furniture etc.Expenses − Rent, bad debt expenses, advertisement, salary, discount, depreciation, commission, repairs, interest etc.Prepaid expenses − Insurance (prepaid), salary in advance, rent (prepaid) etc.Accrued income − Interests on accrued on ... Read More

Trial balance records and categorizes all the ledger balances into debit and credit in a particular period.ObjectivesThe objectives of trial balances are explained below −Arithmetical accuracyArithmetical accuracy of transactions is provided, if trial balance is balanced. If it is not balanced, there may be some error and need for rectification.Error rectificationError rectification in trial balance refers to the following −Postings in various ledger accounts are checked and also their appearances are verified.Subsidiary books are checked.Opening balances are checked and necessary corrections (if any) are made.If the balances are still not balanced, repeat the process.SummarisationTrial balance summarises ledger accounts.Final accountsWithout trial ... Read More

Trial balance records and categorizes all the ledger balances into debit and credit in a particular period. A trial balance includes items like assets, revenues, liabilities, gains, expenses, losses and equity.Usually, trial balance is prepared at the end of the reporting period. Each business transaction is recorded in credit and debit.Quality trial balance shows the sum of transactions recorded in debit is equal to sum of transactions recorded in credits. If there is any error in balancing the credit and debit column, then there must be an error in recording the transaction in trial balance.The errors are rectified by correcting ... Read More

Maintaining two or more accounts for every single business transaction is called a double entry system. Let us now learn about its advantages and disadvantages.AdvantagesThe advantages of double entry system are explained below −Records debit and credit simultaneously.In the double entry system, there will be a dual aspect of every transaction, which means it records both credit and debit transactions simultaneously. This completes accounts of transactions.VerificationUnder the double entry system, arithmetical accuracy (total amount in debit side is equal to total amount in credit side) is verified by preparing trial balance.Profit or lossUnder the double entry system, company profit or ... Read More

Maintaining two or more accounts for every single business transaction is called a double entry system. Each financial transaction has an effect on, at least, two accounts which are equal and opposite.For example, suppose, if a debit transaction has happened in a business, then the same transaction has the opposite effect in other (credit) accounts.The two essentials in the double entry system are debit and credit. Every debit entry is recorded on the left side of the ledger and every credit entry is recorded on the right side of the ledger. At the end, the amount on the debit side ... Read More

The interdependent nature of the world allows people to obtain goods and services from producers to consumers. Some of them include transactions and exchanges. Though both sound similar and interchangeable, they differ in various aspects.TransactionsIn this mode, provision of goods and services exchanged for money is done between firms. This results in movement of value from one to another. In business context, recording these transactions helps in business performance and planning.Business transactions can occur in both cash and credit transactions. These transactions have a direct impact on the company’s financial position and financial records.ExchangeIn this mode, goods and services will ... Read More

During the course operations, every business will have several transactions, which have an impact on business finances and are recorded in books.Cash transactionsCash transactions are those transactions, which are settled at the time of occurrence of transaction. Sometimes, they are settled in cash at the time of occurrence or sometimes they are paid with debit card, credit card, through bank transfer or cheque payment at the time of occurrence.In simple words, a business transaction is said to be a cash transaction, when it is settled immediately at time of occurrence. These transactions show an immediate effect on business cash flows. ... Read More

Let us understand what is an event and a transaction, before learning about their differences.TransactionsIt involves exchange of goods/services for value between more than one party, firm or accounts and is called financial transactions. A transaction has monetary impact on the financial statements. Transactions are recorded in books of accounts.A transaction which is related to purchasing of goods or selling of goods, payments to creditors etc. are called business transactions. Types of accounting transactions are cash transactions and credit transactions.EventEvent is nothing but the final outcome of business activity, which affects the account balances of a company. If there is ... Read More