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 (previous lecture), 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.
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 |
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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.