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Question 11a
Ajay began business.
2018
Jan 1 He opened a business bank account and invested $ 80 000 as capital.
1 He paid rent of premises, $ 400, by cheque
2 Fixtures and equipment costing $ 30 000 were bought and paid by cheque.
3 A short-term loan of $ 10 000 was received from AB Loans,
3 He paid insurance, $ 250, by cheque
5 A motor vehicle costing $ 9 000 was bought and paid by cheque.
5 He paid motor expenses, $50, by cheque
6 A long term-term loan of $ 5 000 was received from Bank.
7 Part of the premises were rented out to another business and a cheque
for $95 was received

Enter these transactions in Ajay’s ledger.

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Question 11b
2018
Jan 21 Ajay sold goods, $ 245, on credit to Xavier Traders.
22 Xavier Traders returned damaged goods, $55, to Ajay.
23 Ajay purchased goods, $ 820, on credit from Varun.
25 Xavier Traders paid their account by cheque.
27 Ajay returned faulty goods, $ 44, to Varun.
30 Ajay gave Varun a cheque for $700 on account
Enter these transactions in Ajay’s ledger.

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Prepare trial balance

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Question

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Prepare trial balance

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Interpreting ledger accounts and their balances

Xavier Traders Account

Date Details F $ Date Details F $

2017 2017
Mar 1 Balance b/d 122 Mar 9 Cash 122
8 Sales 650 12 Returns 98
20 Sales 820 29 Bank 550
31 Balance c/d 822
1592 1592
Apr 1 Balance b/d 822

Explain each entry in the account of Xavier Traders and state where the double
entry for each item will be found
Date Explanation Double entry
Mar 1

12

20

29

31
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TRIAL BALANCE
List of the balances on the accounts in the ledger at certain date.

Purpose
1) The trial balance can help in locating arithmetical errors. however, the
balancing of the trial balance is not proof that the entries in the ledger
accounts are completely free from errors.
2) A trial balance is useful if preparing financial statements.

THE TRIAL BALANCE and ERRORS

1) Error of commission
A business transaction posted to wrong account of the right class ex: Credit
sales to Baker is posted to Bake accounts instead of Baker accounts.
2) Error of complete reversal
A debit entry posted on credit side and vice – versa.

3) Error of Omission
A business transaction is totally omitted from the books.

4) Error of Original Entry

A business transaction incorrectly recorded in the book of prime entry.

5) Error of Principle
A business transaction posted to wrong class of the account. Ex: Motor
expenses is debited to motor vehicles account instead of motor expenses
account.
6) Compensating Errors
Two or more efforts that cancel each other out.
Complete the table below using a tick (/) to indicate if each error would affect the balancing of the
trial balance
Affects balancing of Does not affect
trial balance balancing of trial balance
Inventory, $160, at a customer’s premises at the year end
on a sale or return basis, had been forgotten and not
included in the financial statements.
The sales account had been under cast by $1000.
Goods, $250, taken by owner for her own use, had not
been recorded in the books of account.
A cheque from a Trade receivable, Alice, had been
credited to the account of Alicia.
A payment for vehicle repairs, $300, had been credited to
the vehicle repair account.