Ø Trial Balance:
A statement showing all ledger balances to check Debit = Credit.
Ø Debit:
Amounts where value is received or expenses/assets increase.
Ø Credit:
Amounts where value is given or income/liabilities increase.
Step 1: Liability
Side (Credit Nature)
Ø Capital Account:
Owner’s investment in the business.
Ø Current Liabilities:
Short-term obligations payable within a year.
Ø Accounts Payable:
Amount owed to suppliers.
Ø Duties & Taxes:
Taxes payable to government.
Ø Loans & Liabilities:
Long-term borrowings.
Ø Profit & Loss Account:
Net profit or loss balance.
Ø Opening Balance (P&L):
Previous profit/loss carried forward.
Ø Current Period (P&L):
Profit/loss of current period.
Step 2: Asset
Side (Debit Nature)
Ø Current Assets:
Short-term assets convertible to cash.
Ø Bank:
Balance available in bank.
Ø Cash:
Physical cash in hand.
Ø Closing Stock:
Unsold inventory value.
Ø Accounts Receivable:
Amount to be collected from customers.
Ø Fixed Assets:
Long-term assets like machinery/building.
Step 3: Income
Accounts (Credit Nature)
Ø Sales Account:
Revenue from goods sold.
Ø Direct Incomes:
Income directly related to business operations.
Ø Indirect Incomes:
Other income (commission, interest, etc.).
Step 4: Expense
Accounts (Debit Nature)
Ø Purchase Accounts:
Cost of goods purchased.
Ø Direct Expenses:
Expenses directly tied to production/purchase.
Ø Indirect Expenses:
General business expenses (rent, salary, etc.).
Ø Total:
Sum of all debit and credit balances.
Ø Difference:
Amount showing Trial Balance is not matching.