A trial balance is a schedule or list of balances both debit and credit extracted from the accounts in the ledger, and including the cash and the bank balances from the cash book. The trial balance follows the rule under the double entry where the total debit in the ledger must be equal to the total credit, and the trial balance is recognized as a recognized method of ascertaining whether this is so or not. The trial balance being a summary of the ledger is also used as a material for preparing trading and profit and loss account and balance sheet.
Uses of a Trial Balance
The major use of a trial balance is that, it is used as a material for preparing trading and profit and loss account and the balance sheet. Being a summary of the ledger, it is for accuracy.
The following balances remained in the books of LOBACOBA Limited at 31st December, 2011, after the preparation of the trading account.
Shares capital, authorized and issued 200,000 ordinary shares of N1 each 200,000
Cash at bank and in hand 500
Stock at 31st December 2011 61,209
Sundry Debtors 18,005
Sundry Creditors 15,009
Gross profit from Trading A/c 128,942
General Reserve 25,000
Bad debts 500
Accrued expenses 526
Directors Account (credit) 2,500
Debentures interest (half year) 600
Sundry expenses 4,100
Rates and insurance 1,520
6% Debentures 20,000
Lighting and cooling 1,310
Postage, telephone &telegram 800
Motor vehicle (cost N25,000) 15,000
Office fittings and equipment (cost N65,500) 42,350
Profit and loss account at 1/1/2010 (credit) 22,300
Land and building at cost 239,362
The following additional information is relevant;
- Office fittings and equipment are to be depreciated at 15% of cost and motor vehicle at 20% of cost.
- Provision are to be made for;
Director’s fees 6,000
Audit fees 2,500
- The amount for insurance includes a premium of N600 paid in September 1998 to cover the company against fore loss for the period 1st September, 2010 to 31st August 2011.
- A bill for N548 in respect of electricity consumed up to 31st December 2010 has not been posted to the ledger.
- The directors have recommended that;
- N15,000 be transferred to General reserve.
- 5% Dividend be paid on ordinary share capital.
Trial balance of LOBALOBA Limited after trading account at 31/12/2010