Indicate against each amount whether it is a debit or a credit balance, and prepare a trial balance as at March 31, 2014 based on the following balances: Capital ₹1,00,000; Drawings ₹16,000; Machinery ₹20,000; Sales ₹2,00,000; Purchases ₹2,10,000; Sales return ₹20,000; Purchases return ₹30,000; Wages ₹40,000; Goodwill ₹60,000; Interest received ₹15,000; Discount allowed ₹6,000; Bank overdraft ₹22,000; Bank loan ₹90,000; Debtors : Nathu ₹55,000; Roopa ₹20,000; Creditors : Reena ₹35,000; Ganesh ₹25,000; Cash ₹54,000; Stock on April 01, 2013 ₹16,000.
1. Indication of Debit or Credit Balances:
- Capital: Credit Balance
- Drawings: Debit Balance
- Machinery: Debit Balance
- Sales: Credit Balance
- Purchases: Debit Balance
- Sales return: Debit Balance
- Purchases return: Credit Balance
- Wages: Debit Balance
- Goodwill: Debit Balance
- Interest received: Credit Balance
- Discount allowed: Debit Balance
- Bank overdraft: Credit Balance
- Bank loan: Credit Balance
- Debtors (Nathu and Roopa): Debit Balance
- Creditors (Reena and Ganesh): Credit Balance
- Cash: Debit Balance
- Stock (Opening): Debit Balance
2. Trial Balance as at March 31, 2014
| S. No. | Account Title (Heads) | L.F. | Debit Balance (₹) | Credit Balance (₹) |
|---|---|---|---|---|
| 1 | Capital | 1,00,000 | ||
| 2 | Drawings | 16,000 | ||
| 3 | Machinery | 20,000 | ||
| 4 | Sales | 2,00,000 | ||
| 5 | Purchases | 2,10,000 | ||
| 6 | Sales Return | 20,000 | ||
| 7 | Purchases Return | 30,000 | ||
| 8 | Wages | 40,000 | ||
| 9 | Goodwill | 60,000 | ||
| 10 | Interest Received | 15,000 | ||
| 11 | Discount Allowed | 6,000 | ||
| 12 | Bank Overdraft | 22,000 | ||
| 13 | Bank Loan | 90,000 | ||
| 14 | Debtors (Nathu: 55,000 + Roopa: 20,000) | 75,000 | ||
| 15 | Creditors (Reena: 35,000 + Ganesh: 25,000) | 60,000 | ||
| 16 | Cash | 54,000 | ||
| 17 | Stock (April 01, 2013) | 16,000 | ||
| Total | 5,17,000 | 5,17,000 |
Explanation
To solve this question, we first classify each account based on standard accounting rules: Assets (Machinery, Cash, Stock, Debtors, Goodwill) and Expenses/Losses (Purchases, Wages, Drawings, Sales Return, Discount Allowed) have Debit balances. Liabilities (Capital, Bank Loan, Bank Overdraft, Creditors) and Incomes/Gains (Sales, Purchases Return, Interest Received) have Credit balances. After classification, we list the accounts in the Trial Balance. Similar accounts like Debtors (Nathu and Roopa) and Creditors (Reena and Ganesh) are combined. Finally, we verify that the total of Debit balances equals the total of Credit balances to ensure arithmetic accuracy.
Solution Steps
Step 1: Classify each item into Debit or Credit. Assets (Machinery, Goodwill, Cash, Stock, Debtors) and Expenses (Purchases, Wages, Discount Allowed, Sales Return, Drawings) are Debits. Liabilities (Capital, Loan, Overdraft, Creditors) and Incomes (Sales, Interest, Purchases Return) are Credits.
Step 2: Calculate totals for combined accounts. Debtors = Nathu (₹55,000) + Roopa (₹20,000) = ₹75,000. Creditors = Reena (₹35,000) + Ganesh (₹25,000) = ₹60,000.
Step 3: Prepare the Trial Balance table listing all accounts with their respective balances in the correct Debit or Credit column.
Step 4: Sum the Debit column: 16,000+20,000+2,10,000+20,000+40,000+60,000+6,000+75,000+54,000+16,000 = ₹5,17,000.
Step 5: Sum the Credit column: 1,00,000+2,00,000+30,000+15,000+22,000+90,000+60,000 = ₹5,17,000. The totals match.