Trail Balance

 What is Trial balance

  • Trial balance is a primary source for preparing financial statements such as Trading and Profit & Loss account, Balance sheet etc.
  • A trial balance is a bookkeeping worksheet in which the balance of all ledgers are compiled into debit and credit account column totals that are equal.
  • Trial Balance is a statement summarizing the closing balance of all the ledger accounts
  • It is prepared with the view to verify the arithmetical accuracy of ledger posting. 
  • In Trial balance, all the ledger balances are posted either on the debit side or credit side of the statement.
  • The total of debit balance in trial balance should match with a total of credit balance, only then it is said to be arithmetically accurate. 
  •  A company prepares a trial balance periodically, usually at the end of every reporting period. 
  • The general purpose of producing a trial balance is to ensure the entries in a company's bookkeeping system are mathematically correct.

Why to prepare a trial balance?

Preparing trial balance is one of the first steps towards preparing final accounts and other financial statements. it helps in removing mathematical errors ang brings accuracy to worksheet.

How to prepare a trial balance?

Following are the steps to prepare trial balance:

  1. Preparing ledger accounts to determine the closing balance of each account.
  2. Post the ledger Accounts into trial balance
  3. Place the balance in the debit or credit column. 
  4. All the assets and expenses should have debit balance while liabilities and income should have a credit balance.
  5. Calculate the total of the debit balance
  6. Similarly, compute the total of the credit column
  7. Finally, the sum of debit balance should match the sum of credit balance.

If we found any difference, the process of error rectification should be started. 

Errors could be of commission errors, errors of omissions, errors of principle, compensating error and so on…

No comments:
Write comments

Please do not enter spam links

Meet US


More Services