Book-Keeping and Accountancy · Ch 9 — Final Accounts of a Proprietary Concern
Items Appearing Only in the Trial Balance — Where Each One Goes
Items Appearing Only in the Trial Balance — Where Each One Goes
Before adjustments are even considered, a student must know exactly where every ordinary trial-balance item is placed. This is a purely mechanical (but essential) skill — get an item's location wrong and both the Trading/P&L Account and the Balance Sheet will be wrong.
Goes to the Trading Account (debit side): Opening Stock, Purchases (less Purchases Return), Wages, Carriage/Freight Inward, Octroi and Customs Duty on purchases, Fuel/Gas/Water (factory), Royalty on production, Manufacturing/Factory Expenses.
Goes to the Trading Account (credit side): Sales (less Sales Return), Closing Stock (only if it is already given inside the trial balance — an unusual case meaning it has already been adjusted into Purchases; if closing stock appears as an adjustment outside the trial balance, the more common case, it is entered on the credit side of the Trading Account AND separately in the Balance Sheet, per §7).
Goes to the Profit and Loss Account (debit side): Salaries, Rent/Rates/Taxes (office), Printing and Stationery, Postage and Telegrams, Insurance Premium, Advertisement, Carriage Outward, Discount Allowed, Bad Debts, Interest Paid, Depreciation, Repairs (ordinary), Legal Charges, General/Sundry/Trade Expenses, Commission Paid.
Goes to the Profit and Loss Account (credit side): Commission Received, Rent Received, Interest Received, Discount Received, Dividend Received, Bad Debts Recovered.
Goes to the Balance Sheet (asset side): Land and Building, Plant and Machinery, Furniture and Fixtures, Motor Vehicles, Sundry Debtors, Bills Receivable, Cash in Hand, Cash at Bank, Investments, Prepaid Insurance/Prepaid Expenses (if already given in the trial balance), Goodwill, Patents.
Goes to the Balance Sheet (liability side): Capital, Drawings (shown as a deduction from Capital, not as a separate liability), Sundry Creditors, Bills Payable, Loans (bank/others), Bank Overdraft, Outstanding Expenses (if already given in the trial balance), Reserve Fund/General Reserve. …
Cash or goods withdrawn by the proprietor from the business for personal use; never a business expense — always deducted directly from Capi …
The rule that every trial-balance balance goes to exactly one of three places — Trading Account, Profit and Loss Account, or Balance Sheet — based on whether it is a direct trading item, an indirect expense/incom …