There are two types of error rectifications while preparing the final balance. These are single side error and double side error respectively.Single side errorNominal accounts are preplaced by P&L (Profit & Loss) adjustment accounts.Example − Discount allowed of Rs.750 is not posted to a discount account.After trial balance, the error rectification is as follows −ParticularsDebitCreditDiscount allowed A/c    To suspense A/c750750After final account, the error rectification is as follows −ParticularsDebitCreditP&L adjustment A/c    To suspense A/c750750Double side errorWrong entries are identified and rectification is made by making the appropriate entries.Nominal accounts are replaced by P&L adjustment accounts.Suspense accounts, real and personal ... Read More

There are two types of error rectifications while preparing trial balance. These are single side error and double side error respectively, if the error is detected after preparing trial balance.Single side errorErrors in particular accounts are rectified by applying a suspense account.Suspense account − To prepare final accounts, the difference in trial balance is posted in the suspense account. If an error is rectified in trial balance, then the suspense account is closed. In the balance sheet, the suspense account appears in the asset side, if it appears in the debit side of the balance sheet and vice versa.Example − ... Read More

Rectification of errors can be classified into two types, namely single side error and double side error, if the error is identified before preparing trial balance.Single side errorEntry is rectified by an appropriate posting in an affected account.Example − Entry in purchase account over casted by Rs. 15, 000/-Correction −Dr.Cr Purchase accountParticularsAmount (in rupees)ParticularsAmount (in rupees)ToBy error− wrong posting15000Double side errorWhile correcting the error, following principles are followed −Identify the correct entry.The entry is recorded.Rectification of entry.Example − Company purchased a building worth of Rs.5, 00, 000/- and while recording, they wrongly passed in the purchased account.The rectification is as ... Read More

Let us understand the concepts of balance sheet and trial balance, before learning how to prepare a balance sheet from the trial balance.Balance sheetBalance sheet is one of the important fundamental financial statements for both accounting and financial modeling. This sheet consists of the company’s assets, liabilities and equity.Balance sheet consists of two sides. One side consists of company assets and the other side consists of both liabilities and equity.Trial balanceIn simple words, trial balance is the summary of all business activities and indicates business financial health. Investors decide whether to invest or not based on the company’s trial balance.For ... Read More

Balance sheet is also called a position statement. It consists of assets, liabilities of owners and company. On the other hand, a profit and loss account is called an income statement. It shows the company's earned revenue and sustained expenses during the respective financial year.Both are part of a financial statement and are useful for the parties such as investors, financial institutes etc. to know a company's profitability, financial position and overall performance. By analysing these, they can make decisions regarding investing or for approving the loans.Balance sheetIt shows the financial position of a company. Also, it consists of assets ... Read More

Let us understand the concept and importance of a trial balance and a balance sheet, before learning about their differences.Concept of Trial balanceCompany's accounting department will generate this internal report. Trial balance consists of the list of general ledger accounts and their balances. It shows the credit and debit balances amounts.Later these columns are summed up and consolidated to show that the credit balances and debit balances are equal.Importance -It provides arithmetical accuracy and acts as a precursor in preparing the financial statements. Trial balance is used for verification of amounts from various ledgers. It also determines the balances of ... Read More

BCO Company has following ledger balances. Prepare an unadjusted trial balance as on 1/1/2001.Cash balance − Rs.52000/-Account receivables − Rs. 80000/-Inventory − Rs.35000/-Accounts payable − Rs. 56000/-Long term liability − Rs. 95000/-Equity shares − Rs.15000/-Dividend paid − Rs.1500/-Revenue − Rs. 28450/-Cost of goods sold − Rs. 22000/-Rent − Rs.1750/-Wages − Rs. 1250/-Interest − Rs.950/-SolutionThe solution is as follows −      BCO CompanyUnadjusted trial balance1/1/2001 ParticularsDebitCreditCash52000Accounts receivable80000Inventory35000Accounts payable56000Long term liability95000Equity shares15000Dividend paid1500Revenue28450Cost of goods sold22000Rent1750Wages1250Interest950Total194450194450

Preparing unadjusted trial balance is the third step in the accounting cycle. It is prepared after general ledger and before the adjusted trial balance.In this, all the balances of ledger accounts are listed. It is not suitable for preparing financial statements, balance sheets and income statements because it does not comply with Generally Accepted Accounting Standards (GAAP) or International Financial Reporting standards (IFRS).The purpose of an unadjusted trial balance is to check the debits and credits mathematical equality.ErrorsThe errors of unadjusted trial balance are due to the following aspects −Postings are not correctly posted.Balances are not determined correctly.Ledger balances are ... Read More

Refer the data given below to prepare an adjusted trial balance −CBS ltdTrial Balance 31-03-2007ParticularsDebit (in rupees)Credit (in rupees)Debtor200000Salary35000Rent55000Cash50000Sales250000Purchases60000Furniture25000Loan135000Creditors40000Total425000425000Adjustments are made in salary and rentSalary due = Rs. 55000Rent (refundable deposit) included = Rs. 30000Adjusted entriesThe adjusted entries are as follows −Salary accountTo balance b/d35000To outstanding salary55000By balance c/d900009000090000   Rent accountTo balance b/d55000By rent deposited30000By balance c/d250005500055000Adjusted trial balanceThe adjusted trial balance for the given data is as follows −CBS ltdAdjusted Trial balance 31-03-2007ParticularsDebit (in rupees)Credit (in rupees)Debtor200000Salary90000Rent25000Rent deposit30000Cash50000Sales250000Purchases60000Furniture25000Loan135000Creditors40000Outstanding salary55000Total480000480000Read More

A report consists of balances of all general ledger balances for a period of time called trial balance. It includes all major items like assets, liabilities, revenues, equity, losses and gains. It shows debit balances and credit balances that are recorded in the general ledger at a particular time.This format includes date, particulars/account description, debit balance and credit balance (balance recorded in respective field according to nature of account). Trial balance shows only account totals whereas general ledger shows all account transactions.Sheets are divided into different types according to their nature (transaction recording called as journal entry, summarizing and categorizing ... Read More