[Commerce Class Notes] on Consumer Protection Pdf for Exam

Consumer protection is the practice of securing buyers of goods and services, and the public, against illegal practices in the business. Consumer protection measures are frequently established by law. Similar laws are intended to assist businesses from engaging in fraud or specified illegal practices so as to realize a plus over challengers or to mislead consumers. They may also give fresh protection for the general public which may be impacted by a product (or its product) indeed when they aren’t the direct purchaser or consumer of that product. For example, government regulations may cause businesses to expose detailed information about their products — particularly in areas where public health or safety is an issue, similar as with food or motorcars.

Consumer protection is linked to the idea of consumer rights and to the confirmation of consumer associations, which help consumers make better choices in the business and pursue complaints against businesses. Realities that promote consumer protection include government associations ( similar to the Federal Trade Commission in the United States), tone-regulating business associations ( similar as the Better Business Divisions in the US, Canada, England, etc.), and non-governmental associations that endorse consumer protection laws and help to ensure their enforcement ( similar as consumer protection agencies and watchdog groups).

Consumer Protection Act 2019

The Consumer Protection Act safeguards the consumers and encourages the consumers to speak up against the insufficiency and about the flaws in the goods and services. This Act provides easy and fast compensation to the consumers’ grievances. If the traders and the manufacturers involved in the buying transaction practices any illegal trade in this matter then this act protects all the rights as a consumer.

What is The Consumer Protect Act?

The Consumer Protection Act of 2019 was introduced in the Lok Sabha on the 8th July 2019 by the Minister of Consumer Affairs, in regards to the Food and Public Distribution, Ram Vilas Paswan. It was passed by the Lok Sabha on 30th July in the year 2019 and this was later passed in the Rajya Sabha on the 6th of August in the year 2019. 

The consumer protection bill received its assent from President Ram Nath Kovind on the 9th of August, after which it got notified in the Gazette of India on the same 9th of August itself. The Act came into effect by 20th July of 2020, after which certain other provisions of the Act were established like the Central Consumer Protection Authority (CCPA) came into this effect from 24th of July in the year 2020. 

The features of the Consumer Protection Act focus on providing the customer more power by taking care of them and providing all the transparencies. While, a recent addition in the year 2020 in the month of September, the government declared a new draft which is known as ‘advertising code’ this gives the customer all kinds of protection against the false advertisements, moreover this code protects the customer from the celebrities or idol figures who try to fool the customers by doing all these paid promotions of their products and services. 

Consumer Rights in India 

Right to Safety:

Right to Safety means getting protected against the marketing of goods and services that are hazardous to the life and property of an individual. The purchased goods and services which are availed should not only meet their immediate needs but also meet their long-term needs as well. Also, consumers must be made aware of the ISI and AGMARK, etc. 

Right to Choose:

The right to choose means the right to be assured of the product they are buying. Right to Choose means the consumers are at full freedom to know about the competitive prices existing in the market and then buy the best product. This right is mostly exercised in a competitive market structure.  

Right to be Informed:

The right to be informed means the consumers must be made aware of the quality, quantity, potency, purity, standard, and price of the goods. This will act as knowledgeable protection of the customers against unfair trade practices. The consumers must avail their right of knowing all the details of the product and thus insist on getting all the information about the product or service before making a choice or a decision of their own. 

Right to Consumer Education:

This right means that they must acquire the knowledge and the skill to be an informed consumer throughout their life. Ignorance of knowing any product by the consumers, particularly the rural consumers, acts as the main reason for their exploitation. They should accurately know about their rights and must exercise them wisely. 

Right to be Heard:

Right to be heard means that the consumer’s interests must be heard properly. Their problem must receive all the due consideration at the right forums. The right to be heard also includes the right to be represented in the various forums which are formed to consider the consumer’s welfare. The Consumers should form the non-political and non-commercial consumers organizations, this can be given exact representation in these various committees which are formed by the Government and by other bodies in all the matters which are relating to the consumers.

Right to Seek Redressal:

This means the right to seek redressal against any unfair trade practices or by the unscrupulous exploitation of the consumers. This Right also includes the right to fairly settle for the genuine grievances which are submitted by the consumers. Consumers should also take the responsibility of making genuine complaints about their real grievances. The consumers can also take the help of other consumer organizations in seeking redressal for their grievances.

Central Consumer Protection Authority 

CCPA or Central Consumer Protection Authority, unlike other Councils. This is a type of commissioned body that is neither purely regulatory, advisory nor it is a policy-making body, this body is entirely adjudicatory and quasi-judicial in nature. The structure of the CCPA is also based on a central structure and besides this even provides for the creation of the regional offices, the Act itself does not mandate the creation of any State or any District Authorities on its own. The CCPA also comprises the Chief Commissioner, Commissioners, and a whole team of subject matter experts and professional bodies. Besides this, there also consists of an investigation wing that is being headed by a Director-General.

Central Consumer Protection Council

Under Consumer Protection Act, the Central Government gets to establish a Central Consumer Protection Authority that consists of the Minister in charge of the consumer affairs in the Central Government who is the Chairman and a such number of other official and non-official members, those who are representing other such interests as may be prescribed from time to time.

Under the Consumer Protection Council India, Consumer Protection Rules 1987. The membership of this Council is an accommodation to 150 members, the number includes the Central Minister in charge of the Consumer Affairs who acts as the Chairman. The term of this Council is a span of three years.

The council was formed in order to monitor the implementation of the recommendations of the Council, the Central Government which may constitute a standing working group from among the members of the council which comes under the Chairmanship of the Member Secretary of the Council.

The Council will conduct their meeting as and when it deems fit, but at least one meeting is to be conducted of the Council which shall be held at such time and place as the Chairman may think best.

Did You Know?

  • Under the shed of the Consumer Protection Act, customers remain protected from hazardous goods. 

  • It is the right of a customer to know all the information regarding the product.

  • Consumer Education is given under Consumer Protection.

  • A consumer can also demand a healthy environment under this Act.

  • If you are a customer, then you can file your complaint from anywhere!

  • A customer can also seek a hearing with video conferencing mode too.

  • A customer also knows the reason for the rejection of his complaint.  

Thus, we see that the consumer protection council under the consumer law in India is an exact forum where the aggrieved customers can file their grievances and seek justice. This is indeed a relief to the customers, as without this facility they were easily exploited at the hands of the sellers. Also, with the establishment of this Act, all the sellers are cautious before they deliver any type of goods or services to the customers. 

Apart from this, the consumer protection Act 2019 pdf is attached below this content; students are advised for an in-depth study from the same.

[Commerce Class Notes] on Correlation in a Whole Pdf for Exam

Students of Commerce or Economics must be aware of the term correlation in Economics. The literal meaning of correlation is association. In the fields of Statistics, correlation is the measure of the strength of the relationship between two different parameters or variables. These are linear relationships like height, weight, etc.

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Introduction of Correlation in a Whole 

As per correlation, variables are associated if the change in the value of one is followed by a change in the other variable too. For example, if the demand for a product decreases, it leads to an increase in its price.  

The correlation coefficient, denoted by ρ, signifies the degree of correlation, i.e. the degree to which the movement of the various variables is associated. Pearson product-moment correlation can measure the correlation of linear variables. For non-linear variables, it does not prove to be a suitable measure of dependence.

The value of the Correlation coefficient can lie between -1.0 and +1.0. The values cannot be less than -1 or more than +1. A value of zero denotes no relationship between the variables.

Correlation does not necessarily imply that change in one variable causes the change in another (causation), there could be other reasons involved too.

Here, we will know about different kinds of correlations, with positive correlation examples and negative correlation examples for clarity. 

What is a Positive Correlation?

A positive correlation between two variables is characterized by the movement of both the variables in the same direction. It refers to that if one variable increases, the other one increases too and vice versa. One of the positive correlation examples is if you exercise more, you burn more calories. The values of the correlation coefficient,  ρ,  in case of a positive correlation are greater than 0. A perfect positive correlation happens when the correlation coefficient is equal to +1.0. An entirely positive correlation would mean that both the variables are 100% in tandem concerning the direction of movement and the percentage of movement. Few examples of perfect positive correlation are:

  • If supply is constant, then demand and price both increases in a perfect positive correlation.

  • As a person grows in height, the shoe size increases.

  • If you spend less time in marketing and advertising, you will get fewer customers. 

  • Gains or losses in one market segment will cause gains and losses in another segment. For example, with an increase in the price of fuel, airline tickets also become costlier.

A positive correlation does not always guarantee growth or benefit. At times the causation of movement of two variables in the same direction is not known. As an example, ice cream sales and sunglasses sales both increase at the same time during summer. But the sale of ice cream does not correlate with the sale of sunglasses.

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Negative Correlation Meaning

In a negative correlation, the value of one variable decreases when the value of the other increases, and vice versa. The negative correlation is also called inverse correlation, and its value is less than 0 and goes till -1.0.

A perfect negative correlation is when the relationship between two variables is negative at all times, consistently. One variable decreases with a predictable and comparable increase in the other in a  perfect negative correlation.

A negative correlation is denoted by the value -1.0. Few negative correlation examples are:

  • As the height above sea level increases, atmospheric temperature decreases.

  • If you sleep more, you will feel less tired.

  • If the temperature goes low, you will wear more clothes.

  • An increase in spending habits will decrease bank balance.

  • If there is an increase in average driving speed, there is a decrease in gas mileage.

In the world of statistics, a negative correlation holds special meaning concerning stocks and bonds. As stock prices rise, the bond market begins to decline. The opposite is also true, i.e. the bond market performs better if the stock market underperforms.

So, the difference between positive and negative correlation is that in positive correlation, both variables move in the same direction but negative correlation, they move in opposite directions.

Zero Correlation

When two variables share absolutely no relationship, then they are said to have zero correlation. In other words, the direction in which a variable moves has no relation with the direction of movement of the other variable. Zero correlations examples could be:

  • You sing more when you exercise more.

  • You cook more and you get smarter.

  • More the temperature in a room, the longer you would stay there.

  • If you sleep less, you drink more soda.

What are Scattergrams?

You can show correlation visually utilizing scattergrams. Other names of scattergrams are scatterplot, scatter diagram, scatter graph, and scatter chart. Two numerical values or co-variables are displayed graphically in a scatter diagram as points or dots. Using the scattergram one can determine the strength and direction of the correlation between variables.

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Strong and Weak Correlations 

  • Strong Correlation – If you can predict the values of one variable given the value of another with a high level of accuracy, then the two variables share a strong correlation.

  • Weak Correlation – A weak correlation exists between variables when on average there is a correlation, but exceptions might be there.

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[Commerce Class Notes] on Data Classification Pdf for Exam

Data classification is the process of organizing data according to relevant categories for efficient usage. It helps to locate and retrieve data quickly. This process is vital when it comes to security, compliance, and risk management.

Classification of data meaning, tagging data so that it can be easily tracked. Moreover, it eliminates duplicate data which frees up storage space, lowers backup cost, and accelerates the search process. 

What is Data Classification?

  • It’s the process of categorizing data into homogenous (similar) groups based on shared properties.

  • Raw data is difficult to comprehend and is unsuitable for further analysis and interpretation. Data organization aids users in comparison and analysis.

  • For example, a town’s population can be divided into groups based on sex, age, marital status, and other factors.

Types of Data Classification

There are three types –

  1. Content-based classification stands for categorizing data based on the sensitivity of the information it contains.

  2. Context-based classification stands for segregating data based on its application, location, its creator, along with other factors like characteristics of the information and indirect indicators.

  3. User-based classification is an entirely manual process. It depends on the decision of users on how they want to tag each data. 

Data Classification Methods

Some of the most significant methods are –

  1. Manual interval

  2. Defined interval

  3. Equal Interval

  4. Geometrical interval

  5. Quantile

  6. Natural Breaks

  7. Maximum breaks

  8. Standard deviation

Objectives of Classification of Data

Its objectives are –

  1. Simplification: It helps to present data concisely. Hence, it becomes more convenient to analyze data.

  2. Improves Utility: Classification brings out the similarity in different sets of data, which enhances its utility.

  3. Brings out Individuality: Classification of data in statistics helps in grouping them in various subheads. This process brings out the uniqueness of each data and assists in its better study. 

  4. Aids Comparison: It facilitates easy comparison with a substantial volume of data.

  5. Increase Reliability: Classification is a scientific process, and its effectiveness is proven. Therefore, this process increases the reliability of a specific set of data.

  6. Make it Attractive: One of the main objectives of data classification is to make it more attractive and enhance its presentation value.

  7. Consolidation: Consolidate a large amount of data so that similarities and differences may be rapidly identified. As a result, figures can be grouped into parts based on common characteristics.

  8. Priority: To prioritize the most important data while segregating the unnecessary bits.

  9. Statiscal Analysis: To enable statistical analysis of the collected materials.

Characteristics of an Impressive Classification

  • The primary feature of proper classification is that it makes the data comprehensive. It will cover every item in a set and segregate them into appropriate groups.

  • Every data set lacks clarity owing to its volume. This classification brings much-needed clarity and makes it easier to navigate.

  • Data in a set is often scattered in various places. Classification brings similar information under a single group and improves homogeneity.

  • Every impressive classification must have elasticity, so that, if the purpose of classification changes, the basis of it can change easily.

Data classification is a vital part of economics. Therefore, students who want to learn more about it in detail can visit the official website of .

Classification Methods

The following are the classification criteria:

Classification by Location

  • Geographic classification refers to the classification of data based on geographical places such as countries, states, cities, districts, and so on.

  • It’s also referred to as ‘spatial classification.’

Classification Based on Time

  • A chronological classification is one in which data is classified according to the passage of time.

  • Data is arranged in ascending or descending order according to temporal units such as years, quarters, months, weeks, and so on in this classification.

  • Temporal classification is another name for it.

Classification in Terms of Quality

  • Data are classified using this method based on features or qualities such as honesty, beauty, intelligence, literacy, marital status, and so on.

  • For instance, the population can be segmented based on marital status (as married or unmarried)

The Classification that is Quantitative

  • This classification is based on measurable parameters such as height, weight, age, wealth, student grades, and so on.

[Commerce Class Notes] on Determining Capital or Revenue Nature Pdf for Exam

Determining capital or revenue nature is an essential step when it comes to accounting. However, both the capital nature and revenue nature are different from one another on the basis of the time for which the purchases get used.

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Capital Nature

The capital expenditures consist of huge purchases made on fixed assets which can be used for a longer period of time. In simpler words, it means that the acquisition of the fixed assets for a longer duration of time tends to represent the expenditure’s capital nature. Consider, for example, the expenses that are made to buy the manufacturing equipment which can be used for a longer duration of time.

Furthermore, the company which provides the equipment cannot reduce the full cost and a certain amount of cost is needed to be updated depending on the year-by-year devaluation of the equipment. Generally, these are non-recurring in nature.

The Capital Expenditures are basically classified into three types:

  1. Expenditures which are made for reducing the costs

  2. Expenditures that are made for increasing the revenue

  3. Expenditures that are explainable on the non-economic grounds, which refers to the expenditure made that do not have any relation to the money related to profits.

The Examples of Capital Expenditures include:

  • The expenses which are related to social activities

  • The expenditures that are made to buy machinery

  • The investments that are made to do research innovations and work.

Revenue Nature

Contrary to the capital nature, the revenue nature represents the short-term expenditures. The revenue nature, unlike the capital nature, is related to the expenses which are made for the operating periods in specific. Also, these expenditures neither generate any assets nor any liabilities. Consider, for example, the expenses which are made for facilitating the current operation, which include maintenance expenses, repair costs, etc.

There are basically two different kinds of Revenue Nature Expenditures.

1. Expenditures to generate Revenue:

This is a kind of expenditure which is for the already undergoing operational processes. Similarly, the operating expenditures tend to meet the running factory or business cost needs. In that same year during which these expenses occur, in the revenue expenditures, the liabilities of the tax is also lower.

2. Expenditures to maintain the Revenue-Producing Assets:

These are the type of expenditures for the ordinary and generic repairing and preservation costs. The expectations are for keeping the asset in the working condition without having to involve the increasing life and workability of the asset.

The Examples of the Revenue Expenditures are as Follows:

  1. Salaries for the jobs.

  2. Paying different kinds of rents for shops, houses, etc.

  3. Legal expenses.

  4. Advertising expenses.

  5. Insurance expenses such as life insurance, vehicle insurance, etc.

  6. Electricity and water bill payments.

The revenue nature expenditures, unlike the capital expenditures, are recurring in nature.

Determining Capital Nature and Revenue Nature

There are a few basic considerations for determining the capital nature and revenue nature. These are as follows:

1. Nature of the Business

The capital or the revenue nature depends on the kind of business that a person does, which differs from one business to the other. For example, a business which provides car insurance to people falls under the revenue nature of expenditure, however, the manufacturer that buys machinery for his business falls under the capital expenditure.

2. Recurring Nature of the Expenditure

The capital expenses are non-recurring in nature, while the revenue expenditures have a recurring nature.

3. Purpose of the Expenses

The manufacturing procedure is an example of the capital nature whereas the repairing and renovation procedures are regarded as revenue expenditures.

Differences between Capital and Revenue Nature?

There are various differences between revenue and capital nature of expenditure. But the fundamental difference is that capital expenditures are the long-term acquisitions of fixed assets. Whereas revenue expenses are short-term that are limited to specific operating periods. Revenue expenditure are neither generated assets nor liabilities

  • Example for Capital Expenditure, the expenditures that are used to buy manufacturing equipment that can be used for longer durations.

  • Example for Revenue Nature, the expenditure to facilitate the current operation like repair costs and maintenance expenses.

[Commerce Class Notes] on Difference Between Fixed Cost and Variable Cost Pdf for Exam

Students of Commerce to various concepts that are both theoretical yet practical as they are to do with personal and professional finance. If we put our minds to it, we will surely learn a lot! This section deals with the topic of fixed cost and variable cost. 

Whether you are part of a company or run a business yourself – cost is a fundamental brick without which no company can ever run! It is the total monetary value incurred by a company for the purpose of manufacturing products or ensuring its services reach the target audience. 

Fixed cost remains unmoving for a long period of time while variable cost keeps changing based on the expenditures and assets of the company. 

You will know you have understood these two concepts well when you are able to differentiate between fixed and variable cost in a given set of data.

Fixed Cost

The fixed cost is more or less an independent variable. Irrespective of the productivity or operations of a company, these costs have to be borne by the business at all periods of time. For instance, the commercial rent for the structure occupied by the company is an ideal example of fixed cost. It has to be paid by the company throughout its period of functioning, irrespective of whether it is making profits or not. 

These costs may rarely be subject to changes. They are usually constant over a long period of time.

 Variable Cost

The variable cost as opposed to the fixed cost is dependent on the operations and productivity of the company. A few instances of variable cost include the salaries, utility bills, manufacturing costs and so on. Naturally if the production of the company is at a low, variable costs will be lower. However if the company is running in a full swing, the variable costs will be equally high. 

Fixed and variable costs are an essential part of running an organization. But both need to be monitored and kept within their limits. If they exceed a set target, it could prove to be detrimental for the operations of a company.

[Commerce Class Notes] on Difference Between Trial Balance and Balance Sheet Pdf for Exam

The report lists the balances of a company at a certain point in time of all the general ledger accounts. The accounts that are reflected on the trial balance are all related to major accounting items such as equity, assets, revenues, liabilities, expenses, losses, and gains. The trial balance is generally used to identify at a certain point in time, the credit entries and the balance of debits from the transactions that are recorded in the general ledger.

Features of a Trial Balance

The trial balance usually includes a list of totals of accounts of the general ledger. The general ledger accounts should include the description of the account, the account number, and the final debit/credit balance. Along with this, the trial balance should include the accounting period of the report being created. The trial balance does not show each separate transaction, only the accounts total whereas the general ledges show all the transactions of the account. If any adjusting entries were entered, the trial balance should show the adjusting entry, the figures before the adjustment, and the balances after the adjustment.

What is a Balance Sheet?

The balance sheet is a key part of both financial modeling and accounting. The company’s total assets and how they are financed, either by debt or equity, are displayed in the balance sheet. The balance sheet can also be described as a statement of financial position or a statement of net worth. The fundamental equation that describes the balance sheet is Assets = Liabilities + Equity.

Features of a Balance Sheet

In a balance sheet, the assets and the liabilities are divided into two separate categories which include current assets or current liabilities and noncurrent (long term assets) or noncurrent liabilities. After the illiquid accounts or non-current accounts such as plant, property, and equipment (PP & E) and the long-term debt, more liquid accounts are placed such as cash, inventory, and the trade payables.

Difference between a Trial Balance and a Balance Sheet

Sl no.

Parameters

Balance Sheet

Trial Balance

1

Meaning

The financial statement depicting total assets and liabilities of an organization along with the capital invested by the shareholders in the same is known as the Balance Sheet.

The sheet recording all of the balances of the general ledger accounts is known as the trial balance.

2

Format

The total of assets, liabilities and stockholders equity are displayed in an ideal format of a balance sheet.

Dedicated columns of debit and credit are displayed in a trial balance.

3

Purpose

The main purpose is to give insight to the potential and existing investors about the position and the financial well-being of a company.

The main purpose is to detect if there are any numerical errors that might have occurred while the double-entry system of accounting.

4

Opening or Closing Stock

It considers closing stock.

It considers opening stock.

5

Financial Statement and Financial Accounts

It is a very important part of the financial statements and financial accounts.

It is not a part of any.

6

Types of Accounts

The balance sheet only displays personal and real accounts.

The trial balance can display real, personal, and nominal accounts.

7

Use

It is used for external purposes only.

It is used for internal purposes.

8

Authorization

It requires the authorization of an auditor.

It does not require any authorization.

9

Source

Trial balance acts as the source while working on a balance sheet.

General ledgers act as sources while working on a trial balance.

10

Application

It is used for the evaluation of the financial position of an organization while depicting the accuracy of all financial affairs.

It is used to ensure that the totals of all the debit and credit balances are equal.

11

Recurrence

It is made at the end of each financial year.

It could be made at the end of a month, quarterly, half-yearly, or yearly.

12

Thumb Rule

The proper arrangement of the assets, liabilities, and stockholder’s equity is necessary.

No thumb rule.

Concept of Trial Balance 

Trial balance is an internal report generated by a company’s accounting department that lists general ledger accounts as well as its balances. The columns in the trial balance show the credit balance and debit balance amounts.

The figures in these columns are subsequently summed up for showing that the consolidated credit balance is equal to the consolidated debit balance. 

Importance of Trial Balance

Trial balance acts as the precursor to the preparation of financial statements as well as assessing the arithmetical accuracy. It is used for the verification of actual amounts from various ledgers. It also leads to the determination of the balances of all ledger accounts, which are eventually used for the financial statements.

It assists in the rectification of errors and makes due adjustments. Such adjustments are relevant only for the particular accounting year. Trial balance also helps in the comparative analysis with a previous year’s balances and the current one. 

Concept of Balance Sheet

As an external reporting document, the balance sheet forms a part of the financial statement of a company. It is primarily a summary and report on the balances generated out of liabilities, assets and the equity accounts held by stockholders in the general ledger of a company.

Due to this fact, a balance sheet is also referred to as “Statement of financial position”. This financial statement pertains to a particular date which is usually the accounting period’s last date. 

Importance of Balance Sheet 

The importance of balance as a part of a company’s financial statement can be understood along with the documents of cash flow and income statements. All of these combined together help in indicating the financial position of the company to the interested parties. It imparts the information about what the company owes and owns. 

Such information is particularly crucial for such investors who seek to derive insights on the operations and financial health of a company for considering whether it will be a sound investment option.

Trial Balance vs  Balance Sheet 

The table below shows how to distinguish between trial balance and balance sheet.

Sl.No

Parameters

Trial Balance

Balance sheet

1. 

Meaning 

Trial balance is the compilation of the balances in all ledger accounts 

Balance sheet is the reporting of the financial condition of a company by way of a financial statement. 

2.

Preparation 

After all the ledger accounts have been balanced and totalled, trial balance can be prepared 

After the compilation of trial balance and the profit and loss account is drawn up, balance sheet can be prepared 

3.

Format 

There is a columnar format in trial balance with the right column indicating credit balances and debit balances shown in the left column 

Balance sheet has both a Report form and Account form. Within Report form, asset, liability and equity accounts are presented in a vertical format. Within Account form, the right side represents liabilities and equities, and assets are indicated in the left side

4.

Balances 

Trial balance includes real, personal and nominal account

Balance sheet only includes real and personal account

5.

Purpose 

The purpose of trial balance is to ascertain the arithmetical accuracy in the items and expenses recorded and posted 

The purpose of balance sheet is to determine a company’s financial position on a given date 

6.

Inclusion in Financial statement 

Trial balance is only a list of accounts, and it is not included in the financial statement 

Balance sheet is an integral part of the financial statement 

7.

Signature of Auditor 

As trial balance is not a part of financial statements, there is no need for the signature of auditor 

Balance sheet is one of the important documents in the financial statement. Hence, auditor’s signature is mandatory

8.

Usage 

Trial balance is intended for internal reporting 

Balance sheet is prepared for external reporting 

9.

Frequency 

Trial balance may be prepared multiple times in the course of an accounting year 

Balance sheet is prepared only once at the conclusion of an accounting year 

10. 

Filing 

Trial balance need not to be presented before any entity 

Balance sheet has to be presented before the Registrar of Companies if the operating entity is a company 

Table 1: Trial balance and balance sheet difference 

Trial Balance Example 

Let, the following be the trial balance of a consulting company, XYZ. 

Account Title

Credit

(in Rupees)

Debit

(in Rupees)

Cash 

7000

Accounts Receivable 

3000

Office Equipment 

5000

Office Supplies 

3000

Common stock 

10000

Consulting revenue 

7000

Accounts Payable 

1000

Bank loan 

5000

Utilities expense 

700

Supplies used 

1200

Salary expense 

2500

Rent expense 

600

Total 

Rs.23000

Rs.23000

Table 2: Trial Balance of XYZ

Table 2 shows that the credit equals the debit. However, the figures in the trial balance do not indicate accuracy, and it is entirely possible that an item or transaction may have been missed or a wrong expense account has been entered.

Balance Sheet Example 

Assets

(in Rupees)

(in Rupees)

Office Equipment 

5000

Office Supplies 

3000

Accounts Receivable 

3000

Cash 

7000

Total Assets        

Rs.18000

Liabilities

Accounts Payable 

1000

Bank Loan 

5000

Rs.6000

Equity

Common Stock 

10000

Net Income 

2000

Rs.12000

Total Liabilities and Equity

Rs.18000

Table 3: Balance sheet of XYZ

A balance sheet can be presented in two formats – (a) report form and (b) account form. Table 3 shows the balance sheet of XYZ in report form.

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