Once all the transactions are recorded in various account books, it is necessary to check their accuracy by preparing a statement known as the Trial Balance. This lists the balances of all the accounts in debit and credit from. As each transaction had been entered twice both in debit and credit. The total of the two sides should be equal. The equality of the totals will prove that the accounts have been correctly prepared. While preparing the Trial Balance, the personal and real (property) accounts are balanced and the amounts of the nominal accounts are noted against each item in the respective column. With the help of a Trial balance, which is prepared at the end of a financial year, the profit or loss for the year and Balance Sheet can be determined as on that date. In fact with the Trial Balance for the month, the profit or loss for the month can also be calculated.
The Trial Balance of the restaurant will appear follows:
Profit And Loss Account : If the Trial Balance is analysed the items appearing on the debit side represent nominal expenses, properties (cash and furniture) and personal accounts of debtors (from whom amounts are dues. On the credit side there are items representing incomes (sales. etc.) and personal accounts of creditors, along with the capital account.
Balance Sheet Of The Restaurant: It is profit and Loss Account of the restaurant. These are taken into account at the time of preparing the balance sheet. Real accounts are all assets. Personal accounts representing debtors (with debit balances) are treated as assets, and those personal accounts with credit balance (creditors and capital accounts) are treated as liabilities. Profit or loss shown by the Profit and Loss Account is added or deducted (as the case may be) to or from the Capital Account in the Balance Sheet.
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