O Level Notes : Accounts - Personal accounts and trial balance

As the title of the subject implies, accounting is all about counting. We use different financial statements and methods to count or record data. Like wise, the information we recorded in the daily journal , we now need to make individual personal accounts for all the parties involved in that journal and balance off their accounts to see which account has credit balance and which as debit balance.

O level Accounts Aug 29, 2021 0 468 Add to Reading List

O Level Notes : Accounts - Personal accounts and trial balance

The format of a personal account is as follows

Date	Detials	Amount (Dr)	Date	Details	Amount (Cr)

For instance just consider the example of the following journal and just 3 of its many personal accounts:

Date	Particular	L/F	Debit(Dr)	Credit(Cr)
01.11.2011	Cash account		$1,000
	Mr.asif’s account			$1,000
	Cash account		$51000
	Capital account			$51000
	Started business
11.11.2011	Toyota Motors		$5600
	Bank account			$5600
	Bought van from Toyota motors
16.11.2011	Purchase account		$2000
	Cash account			$2000
	Purchased from admiral traders
17.11.2011	Purchase account		$400
	F.K traders			$400
	Bought goods from FK traders on credit
17.11.2011	Cash account		Rs.550
	Sales account			Rs.550
	Sold goods on cash
18.11.2011	Mr.aun’s account		$600
	Sales account			$600
	Sold goods to MrAun on credit
19.11.2011	Sales return account		$500
	Mr.Aun’s account			$500
	Mr. Aun returned goods due to a fault
20.11.2011	Bank account		$550
	Cash account			$550
	Deposited into the bank

MOTOR VEHICLE ACCOUNT

Date	Details	Amount (Dr)	Date	Details	Amount (Cr)
11.11.11	Toyota motors	$5600		Blance c/d (carried down)	$5600
		TOTAL			TOTAL
		$5600			$5600

PURCHASE ACCOUNT

Date	Details	Amount (Dr)	Date	Details	Amount (Cr)
16.11.11	Purchased goods on cash	$2000
17.11.11	Purchased from FK trader	$400		Balance c/d	$2400
		TOTAL			TOTAL
		$2400			$2400

Mr.Aun’s Account

Date	Details	Amount (Dr)	Date	Details	Amount (Cr)
20.11.11	Bought goods	$600	17.11.11	Returned goods	$500
				Balance b/c	$100
		TOTAL			TOTAL
		$600			$600

*B/b or balance brought down is the money carried forward in hte same account from the previous month to the present month’s account record.

*b/c or balance carried down is the money or balance which has to be carried down into the account records of the same account for the next month.

If b/c is Cr then b/d of the next month would be Dr.

Now that you know how to make personal accounts, lets move a step forward.

Lets talk about Trial Balance.

Trial balance is a financial statement showing the totals of all the accounts in a journal. As the name suggests, its basic aim is to check and ascertain that all the entries are correctly made into all the accounts. Another variation of the accounting equation is TOTAL DEBIT = TOTAL CREDIT. Trial balance is based on this equation. If all the entries are correctly made, the debit side’s total would be equal to credit side’s total.

Format of the trial balance is as follows

#	ACCOUNT NAME	L/F	Dr	Cr

Trial balance of the above mentioned example would be something like this... (just mentioning the3 accounts made)

#	ACCOUNT NAME	L/F	Dr	Cr
1	Purchase		$2400
2	Motor vehicle		$5600
3	Mr.Aun’s account		$100

The trial balance would go on till all the entries have been made and till both the totals are equal.

NOTE : Trial balance only shows the errors that upset the total. For example if you have completely omitted a transaction, the trial balance would still balance and the error would not be highlighted.