Question

Step by step and clearly answer the question below with clear explainations on each question. Display the format in a normal book standard or display I can understand?

From the following balances, prepare a trial balance:
Cash: K4,000
Capital: K10,000
Inventory: K3,000
Sales: K7,000
Purchases: K5,000

Answer 1

### Preparing a Trial Balance

A trial balance is a statement that lists all the balances of general ledger accounts of a business at a specific point in time. It is used to ensure that the total debits equal total credits, which indicates that the books are in balance.

Let's undertake the steps to prepare the trial balance using the provided balances.

#### Step 1: Identify the Accounts and Their Balances

We will categorize the provided balances into debits and credits.

1. **Assets:**
- Cash: K4,000 (Debit)
- Inventory: K3,000 (Debit)

2. **Liabilities:**
- None listed in the balances provided.

3. **Owner's Equity:**
- Capital: K10,000 (Credit)

4. **Revenues:**
- Sales: K7,000 (Credit)

5. **Expenses:**
- Purchases: K5,000 (Debit)

#### Step 2: List the Accounts in the Trial Balance

The format of a trial balance usually includes columns for the account names, and their respective debit and credit balances.

We will set it up as follows:

| Account Title | Debit (K) | Credit (K) |
|------------------|-----------|------------|
| Cash | 4,000 | |
| Inventory | 3,000 | |
| Purchases | 5,000 | |
| Capital | | 10,000 |
| Sales | | 7,000 |
| **Total** | **12,000**| **17,000** |

#### Step 3: Calculate Total Debits and Credits

- **Total Debits:**
- Cash (K4,000) + Inventory (K3,000) + Purchases (K5,000) = K12,000

- **Total Credits:**
- Capital (K10,000) + Sales (K7,000) = K17,000

#### Step 4: Check if Debits Equal Credits

To ensure that the trial balance is correct, we need to check if the total debits equal the total credits.

- Total Debits = K12,000
- Total Credits = K17,000

#### Conclusion

In this case, Total Debits (K12,000) do not equal Total Credits (K17,000), which indicates an imbalance in the accounting records.

**Note**: A proper trial balance must have equal totals in both the debit and credit columns, and if they do not match, it necessitates checking the accounting entries for errors.

### Final Trial Balance Format

Here is the trial balance presented neatly:

```
| Account Title | Debit (K) | Credit (K) |
|------------------|-----------|------------|
| Cash | 4,000 | |
| Inventory | 3,000 | |
| Purchases | 5,000 | |
| Capital | | 10,000 |
| Sales | | 7,000 |
|------------------|-----------|------------|
| **Total** | 12,000 | 17,000 |
```

To rectify this, you would need to review the accounts to find discrepancies or missing entries that could balance the trial balance.