5th Edition

Copyright © 2016 by McGraw-Hill Education (Malaysia) Sdn Bhd All rights reserved.
1
 BALANCING OFF THE
ACCOUNTS AND THE TRAIL
BALANCE

CHAPTER 5

2
 INTRODUCTION
All accounts need to be balanced off, and the
balances are transferred to a trial balance. The trial
balance that is prepared at the end of each month,
facilitates the process of preparing the financial
statements.

3
 BALANCING OFF THE
ACCOUNTS
 The purpose of balancing off the account is to determine
how much is the balance left each account.

 To determine the balance, the DEBIT and the CREDIT

sides of the accounts are compared.

 If the total of DEBIT side is more than the credit side, the
account will have the DEBIT balance.

 If the total of CREDIT side is more than the debit side,

the account will have the CREDIT balance.

 If the total of DEBIT and CREDIT side is balanced, the

account has ZERO balance.
4
 DEBIT BALANCE
All assets and expenses account would have a debit balance.

Example:

Bank a/c Debit total RM400

Bank a/c Credit total RM250

The difference is RM150 is a DEBIT balance.

5
 CREDIT BALANCE

Capital, liabilities and revenues account would have a credit

balance.

Example: Capital account

 Capital a/c Debit total of RM600

 Capital a/c Credit total of RM1000

The difference of RM400 is a CREDIT balance.

6
 ZERO BALANCE

The total debit and total credit is equal, the account will
have a zero balance.

The following example:

Dr total of RM600

Cr total of RM600

The account has a zero balance.

7
 STEPS IN BALANCING
OFF THE ACCOUNTS

I. Add up all entries of the debit side of the account, and all entries
of the credit side of the account. This process will result in 2
totals: debit column total and credit column total.

II. The difference of the totals is the balancing figure, and will be
added to the smaller amount total and then labelled as a balance
c/d.

III. The balance b/d is same as the amount of c/d.

IV. If only one is found in one side of the account, the balancing is
done by recording the same amount on the opposite side as
balance c/d.

8
 TRIAL BALANCE
o Trial balance is a list of all ledger accounts with balances
at a particular date.
o Ledger accounts with zero balance are excluded from the
trial balance.
o Trial balance is prepared at the end of each month.
o The trial balance facilitates the process of preparing the
financial statements.

9
 OBJECTIVES OF THE TRIAL
BALANCE

i. It checks the arithmetical accuracy of the double entry

rules used.

ii. It helps to detect errors within a given time of period.

iii. It helps to facilitate in the preparation of financial

statement.

10
 PREPARATION OF A TRIAL
BALANCE

 State the name of the business and the title.

 Accounts having debit balances are listed in the debit

column.

 Accounts having credit balances are listed in the credit

column.

 The amount in each of the column is then totalled.

11
FORMAT OF TRIAL BALANCE
ABC Trading
Trial Balance as at 31 December 20x2

Particulars (Name of account) DEBIT CREDIT

xxx xxx

12
 ERRORS AFFECTING THE TRIAL
BALANCE AGREEMENT

When a trial balance is not balanced, it indicates one or

more errors occurred in the process of recording the
transactions.

5 types of errors affecting the trial balance:

1. Single entry (recording only a debit or a credit
entry)
2. Errors of transposition (different amount
recorded for a debit and credit entry)

13
ERRORS AFFECTING THE TRIAL
BALANCE AGREEMENT

3. Errors in addition (incorrect balancing figure)

4. Posting to the incorrect side of an account
(post at the wrong side of account)
5. Errors in the trial balance (wrongly transferred
balance from the ledger accounts)

14
 ERRORS NOT AFFECTING THE
TRIAL BALANCE AGREEMENT
 Even though a trial balance is balanced (debit total=credit
total), it does not mean that all transaction are correctly
recorded.

The errors that may not affect the trial balance are:
Error of omission (no transaction recorded at all)
Error of commission (posted the correct amount to the
wrong a/c of the same category)

15
 ERRORS NOT AFFECTING THE
TRIAL BALANCE AGREEMENT
Error of principle (posted the correct amount to a wrong
account of different category)
Complete reversal of entries (recording on the wrong side
of the a/c)
Compensating errors (involves two or more errors and
each error cancels out each other)
 Error of original entry (amount wrongly recorded)

16