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q17 6. Preparation of Trial Balance by Balance of Ledger Accounts Method: Generally the balances of ledger accounts are given, on the basis of which Trial Balance is to be prepared. In this case balances of Accounts are to be identified and the amount should be put in correct column, Debit Credit. The following points, in this regard, should be kept in consideration : 0 Regarding Personal Accounts: The balance of Sundry Debtors accounts in debit while that of Sundry Creditors, the balance is credit. Loan advanced Account, Bank A/c and Drawing A/c have debit balance whereas Capital Account, Bank overdraft account and Loan Received Account reveal credit balance. The accounts showing debit balances are put on the debit side of the trial balance and the accounts showing credit balances are put on the credit side of trial balance. (ii) Regarding Real Accounts : (A) Assets Account - The assets accounts have debit balances, for example, building account, furniture account, machinery & plant account, investment, patent, trade mark and goodwill accounts have debit balances. (B) Accounts relating to goods - Opening Stock account, Purchases Account and Sales Return Account show debit balances, While purchases Return A/c and Sales Account have credit balances. These accounts should be put in trial balance on the basis of their respective balances. (iii) As Regards Nominal Accounts: All accounts related to losses and expenses reveal debit balances. For example Salary, Freight, Wages, Telephone Charges, Discount Allowed, Rent, Rates and taxes etc. But all accounts pertaining to Income and Profit have credit balances. For example commission received, rent received, interest and dividend received, discount received etc. information about an account is clearly given for example Interest (Dr.) discount received or rent received etc., we should follow the same. (iv) Important points to be kept in consideration: (A) In the absence of clear information about such expenses which can either be losses or profit, expenses or Income, then the same should be treated as expenses and losses, for example: Rent, Interest and Discount etc. (B) The amount of closing stock is given outside the trial balance since this account is the result of adjustment entries which are passed at the time of preparation of final accounts, it is not to be included in trial balance unless its adjustment has been done through purchases account. (C) Ascertainment of debit or credit balance for accounts is also possible through passing Journal entry of the transaction. If an account is debited in Journal entry, it has debit balance and if credited, it has credit balance. Illustration 4 : Prepare trial balance as on 31st March, 2016 in the books of Narendra from following information: Opening Stock : ? 15,000, Purchase 1,60,000, Sales 1,80,000, Debtors 50,000 Creditors ? 40,000, Purchase Return * 3,500, Sales Return 34,000, Cash in Hand 2,000, Salaries 20,000, Telephone Expenses 31,700, Cash at Bank 34,500, Insurance & Tax 700, Capital 61,400, Computer Set 3 25,500, Rent 2,000, Closing Stock325,000