We are working towards endorsement for the Cambridge Pathway.
SAMPLE
We are working towards endorsement for the Cambridge Pathway.
Dear Teacher,
Welcome to the new edition of our Cambridge IGCSE™ and O Level Accounting series, providing full support for this course for first teach from 2025. This series has been designed to suit your teaching needs. This preview will help you understand how the Coursebook, Workbook and Teacher’s Resource work together to best meet the needs of your classroom, timetable and students.
This Executive Preview contains sample content from the series, including:
• a guide explaining how to use the series
• a guide explaining how to use each resource.
In developing this new edition, we carried out global research with Cambridge IGCSE Accounting teachers – through interviews, school visits and work on the Cambridge Panel, our online teacher research community. Teachers just like you have helped our experienced authors shape these new resources, ensuring that they meet the real teaching needs of the Cambridge IGCSE Accounting classroom.
The coursebook has been updated for full syllabus coverage and has a range of activities and features to promote active learning, assessment for learning and student reflection. Brand new features, such as “Accounting in Context” and “Accounting in Action”, as well as up to date case studies, bring real life examples into the classroom. The coursebook has been specifically written to support English as an additional language learners with key subject words, glossary definitions in context and accessible language throughout.
The workbook works alongside the coursebook and provides an opportunity for students to practice and consolidate their learning. The workbook has been updated to include end of section practice questions, and features such as “Improve this answer” and “Your challenge”.
Core to the series is the teacher’s resource with digital access. It will help you support your students and confidently teach Cambridge IGCSE Accounting, whether you are new to teaching the subject or more experienced. For each chapter there are lesson ideas and activities, common misconceptions to look out for, language support and worksheets. The teacher’s resource also includes answers to the coursebook and workbook.
Please take five minutes to find out how our resources will support you and your students. To view the full series, you can visit our website or speak to your local consultant. You can find their contact details here: cambridge.org/gb/education/find-your-sales-consultant
Best wishes,
Julia Fusi
Commissioning Editor for Accounting Cambridge University Press and Assessment
How to use this series
All the components in the series are designed to work together.
The coursebook is designed for students to use in class with guidance from the teacher. It offers complete coverage of the Cambridge IGCSE™, IGCSE (9-1) and O Level Accounting syllabuses (0452/0985/7707). The coursebook is divided into four sections, and contains in-depth explanations of accounting concepts, a variety of independent and group activities, as well as engaging new features and images to help students make real-world connections.
A digital version of the coursebook is included with the print version and is also available separately. It includes simple tools for them to use in class or for self-study.
The workbook provides further practice of all the skills presented in the coursebook and is ideal for use in class or as homework. It provides engaging exercises, worked examples and opportunities for students to evaluate sample answers so they can put into practice what they have learnt.
A digital version of the workbook is included with the print version. It includes simple tools for students to use in class or for self-study, as well as downloadable templates to complete some of the activities.
The digital teacher’s resource provides everything teachers need to deliver the course. It is packed full of useful teaching notes and lesson ideas, with suggestions for differentiation to support and challenge students, ideas for formative assessment, overcoming common misconceptions and language support.
The digital teacher’s resource contains downloadable resource sheets and worksheets.
All answers are available on Cambridge GO.
We are working towards endorsement for the Cambridge Pathway.
SAMPLE
How to use this book
Throughout this coursebook, you will notice some features that are designed to help your learning. Here is a brief overview of what you will find.
LEARNING INTENTIONS
Learning intentions open each chapter. These help you navigate through the coursebook and indicate the important sections in each chapter.
ACCOUNTING IN CONTEXT
Accounting in context introduces you to the content in a chapter. It places some of the key ideas contained in each chapter within more of a real-world setting, and includes questions that allow you to discuss the section.
KEY TERMS
Key vocabulary is highlighted in the text when it is first introduced. An accompanying definition tells you the meaning of these words and phrases. You will also find definitions of these words and phrases in the Glossary at the back of this book.
TIPS
Tips are provided throughout this coursebook to help with your learning. The tips might cover advice on answering questions, key skills for your course or how to avoid common errors or misconceptions.
LINKS
These explain the links between sections in different sections of the coursebook.
ACTIVITY
There are various activities throughout this coursebook. These give you the opportunity to discuss sections or produce your own work either individually, in pairs or in groups.
WORKED EXAMPLE
The Worked examples in the coursebook take you through the steps involved in completing an activity and will help you to understand what a successful answer looks like. These also provide support in developing the key skills that are needed for your course.
ACCOUNTING IN ACTION
Accounting in action provides an insight into how the key concepts for this course might apply within a business or workplace setting. Designed to encourage group discussion, the short case studies and accompanying questions will help you to make connections between employment and studying accounting.
DISCUSSION
Discussion questions are used throughout this coursebook to prompt thinking at key points within each chapter.
REFLECTION
Reflection activities enable you to look back on your work and encourage you to think about your learning. You will reflect on and assess the process that you used to arrive at your answers.
SUMMARY
At the end of each chapter, you will find a list that brings together the key information you have learnt. This list can also be useful as a revision aid.
Practice questions
Each chapter contains a set of practice questions that are similar to questions you might find in your assessments. The questions focus on the syllabus assessment objectives –knowledge and understanding, analysis and evaluation.
CHECK YOUR PROGRESS
Each chapter ends with a grid showing the Learning intentions from the start of the chapter. When you are revising, you might find it helpful to rate how confident you are for each of these statements. You should also provide an example to support your score.
END-OF-SECTION PRACTICE QUESTIONS
These practice questions provide further examples of the sort of questions that you might find in your assessments. The questions focus on the assessment objectives that you will need for your course –knowledge and understanding, analysis and evaluation.
Chapter 3 The trial balance
LEARNING INTENTIONS
By the end of this chapter, you will be able to:
•explain why a trial balance is required and its limitations
•prepare a trial balance from ledger accounts and from a list of balances
•correct a trial balance which contains errors
•explain the errors which do not affect the balancing of a trial balance. We
Introduction
A trial balance is a list of the balances on the accounts in the ledger at a certain date.
A trial balance is prepared to check the arithmetical accuracy of the double entry book-keeping. The name of each account is listed in the trial balance. The balance on each account is shown according to whether it is a debit balance or a credit balance. The trial balance will show if the total of the debit balances is equal to the total of the credit balances.
It is important to remember that the trial balance is not a part of the double entry system of book-keeping as it is simply a list of balances. If the ledger accounts are balanced monthly, then a trial balance may also be drawn up at the end of each month.
The trial balance should be headed with the term ‘trial balance’ along with the date on which it was prepared.
The layout of a trial balance is as follows.
ACCOUNTING IN CONTEXT
It is important that the financial records of a business are accurate. One of the ways in which accuracy can be verified is to prepare a trial balance. This checks that the total of the debit balances is equal to the total of the credit balances.
KEY TERM
trial balance: a list of the balances on the accounts in the ledger at a certain date.
SAMPLE
Waseem has been working in a bakery for several years and has decided to start a business supplying bread, cakes and desserts to cafes and restaurants. Waseem is an experienced baker, but he has
very little knowledge of book-keeping. He does understand that all business transactions should be recorded accurately and has heard about a trial balance, but he wonders if it is really necessary or whether it is just a waste of time.
Waseem’s daughter, Zainab, has recently completed a book-keeping course, and he is considering employing Zainab to maintain his day-to-day accounting records. Alternatively, Waseem is considering employing someone who is able to maintain accounting records using accounting software.
Whoever he employs, Waseem is sure that a trial balance will not be necessary: Zainab did very well in her course and will not make any mistakes, or if accounting software is used, it will be 100% accurate.
Discuss in pairs or in a group:
1 Can Waseem be confident that:
a accounting software will have no errors?
b Zainab will maintain accurate records?
2 Why is it important to Waseem that his accounting records do not contain any errors?
Trial balance at ………
Figure 3.1: The owner of a bakery might not have any knowledge of book-keeping
3.1 The purpose of a trial balance
There are two main reasons for producing a trial balance:
1 A trial balance can help with locating arithmetical errors.
2 A trial balance is useful in preparing financial statements.
If the total of the credit balances and the total of the debit balances are not equal, then it means there is at least one error in the accounts. However, if the totals of the trial balance are equal, it does not guarantee that the entries in the ledger accounts are completely free of errors. Later in the chapter, you will learn about errors that will not be detected by a trial balance.
3.2 The preparation of a trial balance
All the ledger accounts which are ‘open’ (those which still have an amount of money showing in the account) are listed in the trial balance together with the balance on the account. If the debit side of an account is larger in money than the credit side, then that account has a debit balance and the amount of the balance (or difference) is entered in the debit column of the trial balance. If the credit side of an account has more money than the debit side, then that account has a credit balance and the amount of the balance (or difference) is entered in the credit column of the trial balance. The debit column and the credit column are totalled. If the totals agree, it indicates that the double entry book-keeping is arithmetically correct.
WORKED EXAMPLE 3.1
Imran started his business on 1 January 20–7. His transactions for his first week of trading were shown in the solution to Worked example 2.3 in Chapter 2. Prepare a trial balance for Imran at 7 January 20–7.
LINK
You will learn about financial statements in Chapters 8–9.
SAMPLE
• It is common to abbreviate ‘debit’ to ‘dr’ and ‘credit’ to ‘cr’.
In practice, a trial balance is drawn up using the actual ledger accounts. It is necessary to know the type of accounts which have a debit balance and those which have a credit balance. These are shown in Table 3.1.
Table 3.1: Types of accounts which have debit balances and those which have credit balances Debit
Assets Liabilities
Expenses
Drawings
Purchases
Sales returns
SAMPLE
Incomes
Capital
Sales
Purchases returns ACTIVITY 3.1
Copy and complete the following table by inserting a tick (✓) to indicate in which column of a trial balance each of the following accounts would be recorded.
Account
Property
Cash
Carol (a credit supplier)
Wages
Mark (a credit customer)
Repairs to fixtures
Bank loan
Carriage outwards
Carriage inwards
Capital
DebitCredit
Compare your answers to Activity 3.1 with a partner. Discuss any differences and then check your answers.
DISCUSSION
Working in a small group, think about a local business and discuss the following:
1 What are some of the ledger accounts the business would need to keep?
2 Would the balance of each of these accounts be recorded in the debit column or the credit column of a trial balance?
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WORKED EXAMPLE 3.2
The following trial balance was prepared by an inexperienced book-keeper and contains errors. Prepare a corrected trial balance at 31 December 20–9.
Farida
Trial balance for the year ended 31 December 20–9
SAMPLE
CONTINUED
SAMPLE
• The heading of the trial balance was incorrect as a trial balance shows the balances in the books on a particular day. It does not cover a period of time.
• Each item had to be considered to decide whether it was in the correct column or if it needed to be amended.
3.3 The trial balance and errors
If the trial balance fails to balance
Figure 3.2: If a trial balance does not balance, it means an error has been made in the financial records
When a trial balance fails to balance, it is obvious that an error has been made somewhere. This may be from:
1 adding incorrectly within the trial balance
2 adding incorrectly within one of the ledger accounts
3 entering a different figure on the credit side to that entered on the debit side when making a double entry in the ledger
4 making a single entry for a transaction rather than a double entry
5 entering a transaction twice on the same side of the ledger.
How to locate an error
The steps that need to be followed to locate an error are shown in Figure 3.3.
Check the addition of the trial balance.
Check the addition of the balance of each ledger account.
Look for a transaction equal to the difference in the trial balance and check that a double entry has been made for that transaction.
Check that each ledger account balance has been entered in the correct column of the trial balance.
Look for a transaction equal to half the difference in the trial balance and check if it has been entered twice on the same side of the ledger rather than once on each side.
Figure 3.3: The steps to follow to locate an error in a trial balance
TIP
If the totals of a trial balance do not agree, you know an error has been made in the ledger or in the preparation of the trial balance.
Check that every ledger account balance has been entered in the trial balance.
Check the double entry for every transaction entered in the ledger since the date of the last trial balance.
If the trial balance balances
When a trial balance balances, it simply means that the total of the debit balances is equal to the total of the credit balances. It does not imply that the double entry has no errors. The trial balance will still balance if any of the errors described in Table 3.2 are made.
Table 3.2: Errors which do not affect the trial balance
Name of errorDescription of error
Error of commission This occurs when a transaction is entered using the correct amount and on the correct side, but in the wrong account of the same class.
Error of complete reversal This occurs when the correct amount is entered in the correct accounts, but the entry has been made on the wrong side of each account.
Error of omission This occurs when a transaction has been completely omitted from the accounting records. Neither a debit entry nor a credit entry has been made.
Error of original entry This occurs when an incorrect figure is used when a transaction is first entered in the accounting records. The double entry will therefore use the incorrect figure.
Error of principle This occurs when a transaction is entered using the correct amount and on the correct side, but in the wrong class of account.
Compensating errors
SAMPLE
These occur when two or more errors cancel each other out.
REFLECTION
Look at the names for the different types of error in Table 3.2.
Sometimes it is helpful to use (or invent) a word to help you remember a list of items. How might remembering ‘COCROP’ help you to remember the different types of error?
Work with a partner to think of some other strategies that you could use to help you remember the names of the different types of error and when they occur.
Example
Cash received from Malini credited to Mallika’s account.
Cash drawings debited to the cash account and credited to the drawings account.
Payment of wages not entered in the books.
Purchase of goods on credit, $100, but recorded as $1 000.
Motor expenses debited to the motor vehicles account.
Purchases account understated by $100 and sales returns account overstated by $100.
ACTIVITY 3.2
For each for the following errors, state whether it would affect the balancing of a trial balance. Give a reason for each answer.
Error 1 No entry had been made for cash sales.
Error 2 Commission received had been correctly entered in the cash account but had been credited to the sales account.
Error 3 Goods returned to Violet had been correctly entered in her account but had been debited to the purchases returns account.
Error 4 Drawings had been correctly entered in the bank account but had been debited to the wages account.
Error 5 The sales account had been overstated by $100 and the purchases account had been understated by $100.
Error 6 Goods purchased on credit from Joseph were correctly entered in the purchases account and debited to the account of Jacob.
ACTIVITY 3.3
Copy and complete the table by naming the type of error which has been made.
Error
Repairs to fixtures debited to the fixtures account
Sales to N Smith debited to the account of M Smith
Balance on cash account overstated by $100 and balance on sales account understated by $100
Cash purchases credited to the purchases account and debited to the cash account
No entry made for cash sales
Goods returned to Hassan, $30, debited to Hassan’s account and credited to purchases returns account as $80
Type of error
You will learn more about errors in the accounting records in Chapter 15.
ACCOUNTING IN ACTION
Finding the errors in financial records
Figure 3.4: If a trial balance does not balance, the financial records must be checked for errors
Tumelo opened a sportswear wholesale business a year ago. He attended a course on book-keeping for small businesses and was able to maintain a full set of double entry records during his first year of trading.
At the end of the financial year, Tumelo prepared a trial balance. He was very disappointed to find that the trial balance totals did not agree. The debit column of the trial balance totalled $61 330 and the credit column totalled $60 095.
Tumelo decided that the first thing to do was to check the double entry for every transaction.
SUMMARY
You should now know:
Eventually, the following errors were found.
A Wages, $1 650, had been recorded as $165 in the bank account. (The bank balance in the trial balance was a debit of $6 580.)
B Cash sales, $460, had been omitted from the books
C The sales returns account had been overstated by $10
D Motor expenses, $95, had been debited to the general expenses account
E The credit balance of Thabo’s account had been overstated by $200
F The credit column of the trial balance had been overstated by $60
Answer the following questions:
1 Explain, giving a reason, whether you agree with Tumelo that the first thing to do is to check the double entry for every transaction?
2 Which of the errors A–F would not have affected the total of the trial balance? Explain why.
3 Calculate the correct trial balance totals.
Compare your answers with a partner and discuss any differences.
SAMPLE
• A trial balance is a list of the balances on the accounts in the ledger at a certain date.
• A trial balance is prepared to check the arithmetical accuracy of the double entry book-keeping.
• If a trial balance fails to balance, it indicates that an error has been made.
• There are six types of error which are not revealed by a trial balance.
Chapter 3 practice questions
1 The balance of which account may appear on the debit side of a trial balance?
A Carriage inwards
B Purchases returns
C Rent income
D Sales [1]
2 The totals of a trial balance did not agree. Which error may have caused this?
A General expenses paid in cash omitted from the accounting records
B Goods purchased on credit from Muzhir credited to Muzdahir’s account
C Repairs to motor vehicle debited to motor vehicle account
D Total of the sales returns account overstated [1]
3 A trader had $6 000 in his business bank account. Rent received from a tenant by bank transfer, $550, was entered in the accounts as $555. How will this affect the trial balance?
Debit balances in trial balanceCredit balances in trial balance
A bank overstated no effect
B bank overstated
C no effect
4 William is a trader. The following balances appeared in his books on 31 March 20–8:
SAMPLE
Prepare a trial balance at 31 March 20–8 to check the arithmetical accuracy of William's double entry book-keeping. [6]
5 Sayeeda provided the following list of balances on 30 April 20–4, but was not able to provide her capital account balance.
Prepare Sayeeda’s trial balance at 30 April 20–4, inserting the missing capital account balance. [7]
6 A trial balance drawn up at the end of Jim’s financial year balanced. However, a number of errors were later found that had not affected the balancing of the trial balance.
a State the type of error made in each of the errors 1–4. [4]
1 Goods returned by Jamil had been credited to Jamella’s account.
2 Repairs to property had been debited to the property account.
3 An invoice, $1 000, for goods purchased on credit from Joseph had been recorded in the accounts as $100.
4 Goods sold on credit to Martha had been credited to Martha’s account and debited to the sales account.
b Name two further types of error not revealed by a trial balance. [2]
[Total: 6]
3 The trial balance
We
CAMBRIDGE IGCSE™ AND O LEVEL ACCOUNTING: COURSEBOOK
CHECK YOUR PROGRESS
How well do you think you have achieved the learning intentions for this chapter? Give yourself a score from 1 (still need a lot of practice) to 5 (feeling very confident) for each learning intention. Provide an example to support your score.
Now I can …
explain why a trial balance is required and its limitations
prepare a trial balance from ledger accounts and from a list of balances
correct a trial balance which contains errors
explain the errors which do not affect the balancing of a trial balance.
ScoreExample to support score
SAMPLE
We are working towards endorsement for the Cambridge Pathway.
Chapter 3
The trial balance
LEARNING INTENTIONS
By the end of this chapter, you will be able to:
•explain why a trial balance is required and its limitations
•prepare a trial balance from ledger accounts and from a list of balances
•correct a trial balance which contains errors
•explain the errors which do not affect the balancing of a trial balance.
Key skills activities
Activity 3.1 Preparing a trial balance
The following balances have been extracted from the books of Lai’s business at 31 March 20–6:
TIP
Reading and revising double entry bookkeeping in Chapter 2 in the coursebook will help you understand the accounts used in a trial balance.
a Complete the table, and for each account:
i state the type of account
ii insert a tick (✓) to indicate whether the account has a debit or a credit balance.
The first account has been completed for you.
b Prepare a trial balance for Lai at 31 March 20–6.
SELF-ASSESSMENT
When answering Activity 3.1, how did you decide whether an account had a debit or credit balance? Explain to another student how you made your decisions.
Most accounts will always have debit balances or will always have credit balances. Outline a method that you could use to help yourself learn which accounts have debit balances and which accounts have credit balances. We are working towards
SAMPLE
3 The trial balance
Activity 3.2 Correcting errors that affect the balancing of a trial balance
A book-keeper has prepared the trial balance for Anil at 30 September 20–7. It does not balance.
SAMPLE
a What errors have occurred in the trial balance?
b Prepare a corrected trial balance for Anil. (Complete this question using the trial balance template.)
TIP
The accounts listed in a trial balance can be set out in any order. However, you may find it useful to put the accounts in the same order as the contents of the financial statements (see Chapters 8 and 9 in the coursebook).
TIP
If you have drawn up a trial balance and it does not balance, the simplest thing to check first is the arithmetic. Start by checking that the debit and credit columns of the trial balance have both been added up correctly.
c Explain why the bank loan has a credit balance but the bank account has a debit balance.
Think carefully to avoid putting the balance of the bank account in the wrong column. It is a common mistake. Remember that if there is money in the bank account, it is an asset and will have a debit balance. However, if there is a negative bank balance, the business owes money to the bank. This is called an overdraft. A bank overdraft is a liability and will have a credit balance.
Activity 3.3 Errors that can occur when a trial balance balances
There are six types of error that can occur even when the debit and credit totals in the trial balance agree. These errors are listed in the table.
Fill in the gaps to complete the table.
Type of errorExplanation
Error of omission A transaction has not been recorded in the accounts. There has not been a ……… or credit entry for the transaction.
Error of ………A transaction is entered in the wrong account, but the account is of the correct type, such as an asset or liability.
Error of principleA transaction is entered in the wrong account. This wrong account is of the ……… type.
Error of ………. entry A wrong ……… is entered in the accounting records.
Error of complete reversal The account that should have been debited has been credited, and the account which should have been ……… has been ……… .
……… errors……… or more errors that have the effect of cancelling each other out.
TIP
3 The trial balance
Activity 3.4 Different types of error
State which type of error has occurred in each of the following situations.
Type of error
TIP
1 New computers for employee use have been debited to the office expenses account instead of the office equipment account.
2 The sale of goods for $250 has been recorded in the accounts as $25.
3 Payment for insurance has been recorded in the wages account instead of the insurance account.
4 New furniture has been bought for employees to use at work. It has not been recorded.
5 The balances on the loan account and the purchases account were both $300 too low (understated).
6 Payment for rent has been credited to the rent account and debited to the bank account.
Chapter 3 practice questions
1 What is a purpose of a trial balance?
A Classifies accounts into assets and liabilities
B Corrects errors of original entry
C Creates compensating errors
D Helps find arithmetical errors in the accounts [1]
2 What is a limitation of a trial balance?
A Delays payments for expenses
B Errors can still exist even if the trial balance balances
C Replaces the need for ledger accounts
D Used to prepare financial statements [1]
3 Office equipment has been bought. The book-keeper did not realise that it was an asset and entered it into the office expenses account. What type of error has occurred?
A Commission
B Compensating
C Complete reversal
D Principle [1]
Remember that if the debit and credit column totals in a trial balance are different, we know there is at least one error. However, do not assume that everything is correct if the debit and credit totals in a trial balance are the same. It is still possible that the trial balance contains errors.
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SAMPLE
CAMBRIDGE IGCSE™ AND O LEVEL ACCOUNTING: TEACHER’S RESOURCE
How to use this Teacher’s Resource
This Teacher’s Resource contains both general guidance and teaching notes that help you to deliver the content in our Cambridge resources.
At the start of each chapter there is a Teaching plan, which summarises the topics covered in the chapter, including the approximate number of learning hours recommended for the topic, an outline of the learning content, and the Cambridge resources that can be used to deliver the topic.
Sub-chapterApproximate number of learning hours Learning content Resources
The Background knowledge feature explains the prior knowledge required to access the chapter and gives suggestions for addressing any gaps in your students’ knowledge.
BACKGROUND KNOWLEDGE
The Language support feature contains suggestions on how to support students, especially those with English as an Additional Language.
LANGUAGE SUPPORT
There are often Common misconceptions associated with particular topics. These are identified in a table along with suggestions for eliciting evidence of these misconceptions in your class and suggestions for how to overcome them.
There is a set of teaching notes for each chapter of the coursebook. These teaching notes contain various activity ideas that will help you deliver the chapter.
CAMBRIDGE IGCSE™ AND O LEVEL ACCOUNTING: TEACHER’S RESOURCE
At the start of each set of teaching notes, there is a Learning plan table that includes the syllabus learning objectives, learning intentions and success criteria that are covered in the chapter. You may wish to use these in your lesson planning.
LEARNING PLAN
Syllabus
Each sub-chapter is covered by a selection of Starter ideas, Main teaching ideas and Plenary ideas. You can pick out individual ideas, and mix and match them depending on the needs of your class. The activities include suggestions for how they can be differentiated or used for assessment. Homework ideas are also provided.
The teaching notes include a range of downloadable worksheets, which are provided as both PDF and Word files so that you can edit them as you choose.
You will also find answers to the coursebook and workbook questions at the end of this resource.
3 The trial balance
Teaching plan
Sub-chapterApproximate
3.1 The purpose of a trial balance 1.0
3.2 The preparation of a trial balance 1.5
3.3 The trial balance and errors 2.0
Understanding the purpose of a trial balance.
Preparing a trial balance with the balances in the correct column.
Resources
Coursebook: Accounting in context
Workbook: Practice question 1 and 2
Coursebook: Activity 3.1
Practice question 1, 4 and 5
Workbook: Activity 3.1
Teacher’s Resource: Worksheet 3.1
Understanding the errors which are and are not revealed by a trial balance and identifying them.
Coursebook: Activity 3.2 and 3.3
Accounting in action Practice question 2 and 6
Workbook: Activity 3.2, 3.3 and 3.4 Practice question 3
Teacher’s Resource: Worksheet 3.1
BACKGROUND KNOWLEDGE
Students understand the relationship between assets, liabilities and capital in the form of the accounting equation. They are also familiar with the concept of debits and credits, including how each affects various accounts, and with account types: assets, liabilities, capital, revenue (sales) and expenses. This information will help the students in knowing which accounts should be in the debit column and credit column based on the type of account. These concepts are covered in Chapter 1 and Chapter 2 of the Coursebook and Workbook.
LANGUAGE SUPPORT
Some of the accounting terms introduced in this chapter have more than one meaning in the English language, and it is vital that students appreciate the accounting context.
• ‘Trial’ refers to a test of the performance to see if there are errors, not a formal examination of evidence by a judge.
• A mnemonic you may use to help the students remember which side of the trial balance the different accounts go on is DEALIR:
Debit Credit
D – DrawingsL – Liabilities
E – ExpensesI – Income
A – AssetsR – Revenue
• Another mnemonic is DEAD CLIC:
DEBITS: Expenses, Assets, Drawings
CREDITS: Liabilities, Income, Capital
These mnemonics are useful for students to remember which side of the trial balance the different accounts are entered.
Common misconceptions
Misconception
Students confuse the debit and credit sides, thinking debit means increase and credit means decrease.
Students may think that a balanced trial balance means that there are no errors.
Ask students to explain their understanding of debits and credits to a peer.
Ask students if a balanced trial balance means all the accounting records have been done correctly and is therefore error free?
Explain that debit and credit are book-keeping terms that describe the two sides of every financial transaction in the double entry system. The side that increases and decreases depends on the type of account being used.
Explain that a trial balance is a tool to check that the total debits and credits in the ledger are equal. This indicates the correct use of the double entry system. A trial balance does not determine all types of errors.
3.1 The trial balance
LEARNING PLAN
Syllabus learning objectivesLearning intentions
This chapter covers 3.1 of the specification.
3.1 The trial balance
•the purposes and limitations of a trial balance
•how to prepare a trial balance from a given list of balances and amend a trial balance which contains errors
•the types of errors which do not affect the trial balance: commission, compensating, complete reversal, omission, original entry, principle
SAMPLE
In this topic, students will:
•explain why a trial balance is required and its limitations
•prepare a trial balance from ledger accounts and from a list of balances
•correct a trial balance that contains errors
•explain the errors which do not affect the balancing of a trial balance
Success criteria
•Explain the purpose of a trial balance.
•Prepare a trial balance with the correct balances in the debit and credit columns.
•Correct an incorrect trial balance.
•Identify, name and explain the errors which do not affect the balancing of a trial balance.
Starter ideas
1 What is a trial balance? (10 minutes)
Resources: YouTube video ‘The importance of keeping accurate business records’ by Classy Marketing, on the importance of accurate financial records in business
Description and purpose: Ask students: What do you think happens before financial statements are compiled? Show the short video clip about the importance of accurate financial records in businesses. What to do next: Discuss the video with students and link it to the need for a trial balance.
2 What does a trial balance look like? (20 minutes)
Resources: Coursebook Section 3.2, YouTube video ‘What is a general ledger? A guide for small businesses | Run your business’ by Intuit QuickBooks, on how businesses track their finances by using ledger accounts.
Description and purpose: Students will understand the components of a trial balance, including account names, debit balances and credit balances, as well as the structure of a trial balance – that it has two columns: one for debits and one for credits.
As a class watch the video. Explain the concept of a trial balance using a visual example on the board.
Discuss the structure of a trial balance, highlighting the importance of debits and credits. Distribute a sample set of ledger accounts to students containing different types of accounts, for example, assets, liabilities, income, expenses. Walk through the process of preparing a trial balance together, asking guiding questions such as:
•What do you list first?
•Where do you find the balances?
•What should you do if you find a difference?
Monitor student performance by circulating the room and providing feedback, ensuring students understand the process.
What to do next: Ask students to consider whether errors may be hidden in a trial balance that balances.
SAMPLE
Main teaching ideas
1 The importance of a trial balance (45 minutes)
Learning outcome: To explain why a trial balance is required and its limitations; to prepare a trial balance from ledger accounts and from a list of balances; to correct a trial balance that contains errors.
Resources: Coursebook Section 3.1 Accounting in context; Worksheet 3.1; Workbook Activity 3.1
Description and purpose: On the board, write: Why do we need to conduct a trial balance if software is 100% accurate, or if a trained book-keeper is balancing the accounts?
Move on to Waseem’s scenario in the Accounting in context feature in the Coursebook. Ask students whether they agree or disagree with Waseem that he does not need a trial balance.
You can then define what a trial balance is and outline its purpose:
• Definition: A trial balance is a summary of all the ledger account balances, which is used to check that the total debits equal the total credits.
• Purpose: A trial balance helps to identify errors in the accounting records and ensure the accuracy of financial statements.
The two main purposes of a trial balance are therefore: to locate arithmetical errors and to prepare financial statements. You should also emphasise that, as with any software or technology, there is a risk of limitations. Explain to students that errors such as omissions, compensating errors and incorrect entries will not be detected by the software.
Refer back to Waseem’s scenario and ask students to discuss the following questions in small groups:
1 Can accounting software eliminate all errors?
2 Will Zainab’s skills guarantee there are no mistakes?
3 Why will Waseem’s business benefit from using a trial balance?
Let each group summarise their key points and share with the class.
Next, students can complete Activity 3.1 in the Coursebook and Activity 3.1 in the Workbook.
Differentiation ideas:
• Support: Provide students with a trial balance that you have annotated to show where the errors are. Students work through this to see the common errors when preparing a trial balance and take note of why these are errors. In pairs, students explain the errors to each other, to ensure they grasp the concept correctly and are able to correct the errors
• Challenge: Ask students to create a partially completed trial balance with errors. You can distribute this to the other students to complete
Assessment ideas: Students complete Worksheet 3.1 as an assessment. You can mark it and provide feedback to students who are struggling to understand which balances are debit and which are credit.
2 Why trial balances fail and how to identify the errors (45 minutes)
Resources: Coursebook Section 3.3, Activities 3.2 and 3.3, all Practice questions; Workbook Activities 3.2, 3.3 and 3.4
Description and purpose: This task helps students to understand:
• the common reasons why trial balances may fail to balance
• the steps they can use to locate the errors when it does not balance
• that a balanced trial balance is not always error-free
Present students with a relatable analogy, such as: ‘Imagine you are packing for a trip. You check your bag, and your checklist shows everything you needed to pack. Your checklist showed four pairs of socks, but when you open your bag, there are three and a half pairs! One sock is missing. You also packed an extra pair of jeans, which were not on the checklist.’ You can then relate this analogy to errors in trial balances: even if the ‘totals’ seem correct; errors can still occur in the process.
Students individually read Section 3.3 in the Coursebook.
Next, use examples to help students understand the possible reasons the balances fail. You can use the following reasons and examples to help you:
Reasons
SAMPLE
Examples
Error of addition in the trial balanceAdding debit column total incorrectly
Error of addition in a ledger accountSumming up the debit side of a ledger incorrectly
Unequal double entry
Single entry
Recording $500 as a debit and $50 as a credit
Only recording a debit entry
Duplicate entry on the same sideEntering $5 000 twice on the debit or credit side
Next, introduce the steps that need to be followed to locate an error to students:
1 Recheck the arithmetical accuracy in the trial balance.
2 Recheck the arithmetical accuracy in individual ledger accounts.
3 Verify that each ledger account balance has been correctly transferred to the trial balance.
4 Check that credits and debits match for each double entry.
5 Ensure no single or duplicate entries were made.
You can give students the following mnemonic to help them remember the five steps above:
Steps to follow to locate an error
1 Rain and Rabbits in August
Recheck additions ; Recheck additions (individual accounts)
2 Check the Tower and the Lake at the Trial Balance; Ledger Accounts
3 Village and at the Castle to make sure the
4 Cats do not mix with the Ducks
5 End the day with Soup and Dumplings
Verify that each ledger account balance has been correctly transferred to trial balance
Check that credits and debits match for each double entry
Ensure no Single or Duplicate entries were made
Students complete Activity 3.2 in the Coursebook and Activity 3.2 in the Workbook. Afterwards, or perhaps in the next lesson, refer to Coursebook Table 3.2: Errors which do not affect the trial balance. Write a scenario for each error on the board. Ask students to explain why the errors will not affect the balance.
Students then complete Activity 3.3 in the Coursebook and Activity 3.3 and 3.4 in the Workbook. Differentiation ideas:
• Support: Visually display each error with examples and ask students to explain why it does not affect the trial balance totals.
• Challenge: Ask advanced students to design their own scenarios featuring a mix of errors and explain their solutions to the class. Alternatively, ask students to come up with their own errors for ‘COCROP’ and create a trial balance with annotations as to why it will not affect the balance.
Assessment ideas: To consolidate the learning, students complete the practice questions in the Coursebook. You can mark these and provide feedback to students on any errors they have made.
Plenary ideas
1 Accounting in action (15 minutes)
Resources: Coursebook Accounting in action; Workbook Practice questions
Description and purpose: Consolidation of the key points covered in Chapter 3.
Read the ‘Accounting in action’ feature in the Coursebook and answer the questions based on the scenario. Allow pairs to compare their answers and discuss any differences.
Assessment ideas: Complete the practice questions in Chapter 3 of the Workbook. You can mark these and make sure students have answered them correctly.
2 Revision notes (20 minutes)
Resources: Coursebook Chapter 3; Workbook Chapter 3; paper, coloured pens/highlighters
Description and purpose: Students produce a set of revision notes and a mind map/paragraph summary to outline the key concepts in double entry book-keeping. They can make the notes visual using colour/ highlighting of key terms/words.
Assessment ideas: Encourage students to continue with the revision book from Chapter 1 to collate all revision notes at the end of each chapter. This can be used for revision at the end of the course.
Homework
Give students a faulty trial balance that does not balance. Ask students to identify the errors and correct them.
Provide a list of account names and balances. Ask students to classify the items as assets, liabilities, capital, revenue and expenses. Students then prepare a trial balance.
Downloadable resources
Worksheet
3.1 The trial balance
The purpose of this worksheet is to gauge students’ ability to correct an incorrect trial balance and see whether they are able to classify the items correctly by placing them in the correct column.
The trial balance
1 Correcting a trial balance
Javari has the following trial balance. It contains errors as it is not balancing. Correct the blank version of the trial balance to ensure it balances.
CAMBRIDGE IGCSE™ AND O LEVEL ACCOUNTING: WORKSHEET 3.1
Javari Trial balance at 31 March 20–7
Detail Debit $Credit $ Bank
Furniture
Motor vehicles
XYZ Loan
Cash
Rent expense
Stationery
Motor expenses
Rent