Trial Balance: Preparation (Balance Method only) MCQs Quiz | Class 9
This quiz is for Class 9 students studying Elements of Book-Keeping & Accountancy (Code 254), focusing on Unit 7: Trial Balance. Test your knowledge on the preparation of a Trial Balance using the balance method, covering topics like listing ledger balances, understanding debit and credit columns, and what the agreement of totals signifies. Answer all questions, submit your quiz, and download the PDF answer sheet to review your performance.
Understanding the Trial Balance (Balance Method)
A Trial Balance is a statement prepared with the debit and credit balances of all ledger accounts to test the arithmetical accuracy of the books of accounts. The Balance Method is the most common way to prepare it. If the total of the debit column equals the total of the credit column, it is assumed that the posting to the ledger is arithmetically correct.
Key Concepts in Preparing a Trial Balance
1. Listing Ledger Balances
The first step is to balance all ledger accounts. This means finding the difference between the total debits and total credits for each account. The resulting figure is the ‘balance’ of that account. This closing balance is then carried forward to the Trial Balance.
- Asset Accounts: (e.g., Cash, Machinery, Building) normally have a debit balance.
- Liability Accounts: (e.g., Creditors, Bank Loan) normally have a credit balance.
- Capital Account: Always has a credit balance.
- Expense Accounts: (e.g., Salaries, Rent, Purchases) always have a debit balance.
- Income/Revenue Accounts: (e.g., Sales, Commission Received) always have a credit balance.
2. Debit and Credit Columns
Once you have the balances for all ledger accounts, you list them in the Trial Balance format. The statement has columns for the name of the account, and two amount columns: one for debit balances and one for credit balances.
| Type of Account | Normal Balance | Placed in Trial Balance Column |
|---|---|---|
| Assets (e.g., Cash, Debtors) | Debit | Debit (Dr.) |
| Expenses (e.g., Rent, Wages) | Debit | Debit (Dr.) |
| Liabilities (e.g., Creditors, Loans) | Credit | Credit (Cr.) |
| Capital | Credit | Credit (Cr.) |
| Revenue/Income (e.g., Sales) | Credit | Credit (Cr.) |
3. Agreement of Totals
The final step is to total both the debit and credit columns. According to the principles of double-entry bookkeeping, for every debit, there is a corresponding credit. Therefore, the total of all debit balances must equal the total of all credit balances. This is known as the ‘agreement’ of the Trial Balance. If the totals do not agree, it indicates that there are one or more arithmetical errors in the accounting records.
Important Note: An agreed Trial Balance is not conclusive proof of accuracy. Some errors, like errors of principle or compensating errors, are not revealed by a Trial Balance.
Quick Revision Points
- The main objective of a Trial Balance is to check the arithmetical accuracy of the ledger accounts.
- It is prepared on a specific date, usually at the end of an accounting period.
- Under the Balance Method, only the closing balances of ledger accounts are listed.
- All asset and expense accounts are shown in the debit column.
- All liability, capital, and income accounts are shown in the credit column.
- If Dr. Total = Cr. Total, the books are considered arithmetically correct.
Extra Practice Questions
- State whether the balance of a ‘Sales Account’ is placed in the debit or credit column of the Trial Balance.
- What does it mean if the totals of a Trial Balance do not agree?
- A ‘Machinery Account’ has a balance. Which column will it be recorded in?
- Name two types of accounts that have a normal credit balance.
- Is a Trial Balance a part of the final accounts? Explain briefly.
