Activity 1

1 Explain what a trial balance is.

2 State two uses of a trial balance.
3 Explain one limitation of a trial balance.
4 State the names of the accounts that will be debited and credited in the following
transactions:

2018 Account to Account to be

be debited credited
May 1 The owner invested $6 900 by cheque in the
business.
May 3 The business bought goods from L. Larry
$670 on credit.
May 5 The business sold goods to Kelly on credit
$780.
May 7 The business returned goods to L. Larry $45.
May 10 The business sold goods and deposited the
money in the bank $890.
May 17 The business bought stationery $76 paying
by cheque.
May 20 Kelly returned goods worth $89.
May 24 The business paid L. Larry by cheque in full
settlement.
May 27 Kelly paid the business by cheque in full
settlement.
May 29 The business paid wages $67 by cheque.
May 31 The owner withdrew $40 from the bank for
his personal use.
 Activity 2
State whether the accounts shown in the table below will have a debit or credit balance.
Use your knowledge of the accounting equation to help you. The first one is done for you.
Account name Debit or credit?
******e********************. e.s**e****************

Purchases Debit
Sales
Return outwards ***********.

Cash
Drawings
Capital
Trade receivables
*********************************

Trade payables
Motor vehicle
Rent
Returns inwards
Rent receivable
Bank overdraft

Stationery
*********

Inventory
 Activity 3
Hiloma has a business supplying furniture. His financial year ends on 31 March. In
March 2018, his accounts showed the following balances:

Opening inventory 4000

Non-current assets at cost 45000
Cash at bank 700 (dr)
Sales 8000
Purchases 4700
Return inwards 450
Return outwards 50
Rent 340
General expenses 860
Drawings 500
Capital ?
1 Using your knowledge of the accounting equation, calculate the capital.
2 Prepare Hiloma's trial balance as at 31 March 2018.
3State whether capital has a debit or credit balance.
 Activity 4
ldentify the errors made in the following transactions. The first one has been done
for you.
***.

Transaction
******************* Type of error
1The purchase of a motor vehicle $5 600, had been entered in error
in the motor expenses account.
Error of principle
2 The purchase of a motor vehicle on credit from Simpson for $3500
had been completely omitted from the b0oks of the business.
3 Inventory taken for own use $120 has been debited to purchases
account and credited to drawings.
4 Returns inwards $178 from Hadi had been entered in error in Ali's
account.

5 The sales account was under-cast by $689 and the office

expenses
account was under-cast by $689.
6 The payment for repairs to the motor vehicle $45 had been entered
in error in the motor vehicle account.
7A sale of $567 to Ella had been entered in the books, both debit and
credit, as $756.
8 Cash paid to M. Rainman $54 entered on the debit side of the cash
book and the credit side of M. Rainman's account.
.e*****.*********
Exam-style questions
The following multiple choice questions should be completed within five
minutes. Four possible answers are given for each question and you must choose
the one most appropriate answer.
1 Which error affects the trial balance?
A An addition error in the Sales returns account
B Debiting a sale to M. Jalan's account instead of J. Balan's account
CDebiting the repairs to machinery to the machinery account
D Failing to enter a purchases invoice in the accounting records
2Atrial balance has equal debits and credits of $40000 each. It was 104
subsequently discovered that a rent payment of $400 had been entered
wrongly in the insurance premium account instead of the rent account.
What will the trial balance totals be after the error was corrected?
A $39600
B $40000
C $40400
D $44000 [1)
3 The purchase ofa new table has been debited to the repairs account in error.
Which type of error is this?
A Complete reversal of entries
B Omission
cOriginal entry
D Principle [1]
4 Which error is an error of omission?
A No entries have been made for the purchase of machinery for cash.
B Purchase of machinery for cash has only been entered in the cash book.
C Purchase of machinery for cash has only been entered in the machinery
account.
D The machinery account has not been entered in the trial balance. [1]
5 What is the purpose of the trial balance?
A To check that all invoices have been sent
B To check that all notes have been sent
C To check that the bank balance agrees with the bank statement
D To check the arithmetical accuracy of the double entry system used [1]
The marks allotted to the following structured questions are a guide to the
length of time that should be taken to complete them.
6 Name two errors that do not affect the trial balance. [2]
7In Lylah's books, credit purchases from a supplier, Kenny, have been
credited to the purchases account and debited to the Kenny's account in
error. Name the type of error which has been made. [1]
 Errors that do not affect the trial balance

8 Copy and complete the table below. Place a tick to show on which side of
a trial balance each item would appear. The first one has been completed
as an example.
********s******* (5]
Debit Credit
Machinery
Purchases
************

Bank overdraft
Capital
Drawings
Trade receivables
*.*****

9 A payment for machinery repairs has been debited to the machinery

in error.
account
a Name the type of error which has taken place.
b Explain the effects of this error on the trial balance. [1]
10 Sanath Jaffer is a trader. His financial year ends on 31 January. He
[2]
the following information on 31 January 2013.
provided

Capital 53000
Drawings 6 100
Revenue 6 6000
Purchases 43 350
Purchases returns 1150
Inventory 1 February 2012 3 700
Inventory 31 January 2013 4 100
Bank overdraft 3 050
Trade receivables 5 320
Trade payables 3 450
General expenses 17 850
Non-current assets 50 400

Complete a trial balance for Sanath Jaffer at 31 January 2013. Show any
difference you find as a balance on an appropriate account. [7]
(Adapted from Cambridge IGCSE Accounting 0452/21, May/June 2013, Q3 a)
11 a Complete the table below. Use a tick () to show on which side of a trial
balance each item would appear. The first one has been completed as an
example. [5]
Debit Credit
e************

Equipment
Bank overdraft
Sales
Discount allowed
*****************u****************.
Capital
Drawings

95
FALANCE

b State one purpose of preparing a trial balance. [1]

c Apayment for vehicle repairs has been debited to the motor vehicles
account in error.
i Name the type of error which has taken place. [1]
ii Explain the effects of this error on the trial balance. [2]
(Adapted from Cambridge IGCSE Accounting 0452/13, October/November
2013, Q2 d, e &f)
12 Christos is in business buying and selling goods on credit. The following
details relate to the account of Michelle for the month of July 2011.
$
Jul 1 Michelle owed Christos 200
Jul 7 Christos sent an invoice to Michelle 150
Jul 16 Christos sent a credit note to Michelle 8
Jul 31 Michelle sent Christos a cheque 195
Jul 31 Christos allowed Michelle cash discount 5

a Prepare the account of Michelle in the books of Christos. Bring down

the balance on 1 August 2011. [6]
b Name the book of prime entry in which Christos would record the
transaction of 16 July 2011. [1]
The balances on Christos' books at 31 July 2011 were as follows:
$
Capital ?
Drawings 8 000
Office furniture 5 000
Provision for depreciation office furniture 3 200
Inventory 4 150
Bank overdraft 250
Trade payables 2 950
Sundry expenses 10 600
Purchases 32 400
Provision for doubtful debts 350
Revenue (sales) 53 750
Trade receivables 6 250

c Prepare the trial balance for Christos at 31 July 2011, including the
balance on the capital account. [6]
dState the item in the trial balance which would include the balance
on Michelle's account. (1]
e State two differences between a trial balance and a statement of
financial position. [4]
(Adapted fromCambridge OLevel Accounting 7110/21, October/November
2011, Q1)
IChapter review questions
1 Define what is meant by opening inventory.
2 State two uses of a trial balance.
3 Define what is meant by closing inventory.
4 Explain why closing inventory is not included in a trial balance.
5 Explain three errors that affect a trial balance.
6 Complete the following sentences, choosing from the words below:
account; debit; statement; particular; balances; credit
A trial balance is a of. names and their in
and columns on a day.