Trial Balance means a list of all the ledger accounts contained in the ledger of a business. It includes the revenue, expense and capital account nature. Trail balance defined as, it is a statement containing the balances of all the ledger accounts, as at any given date, arranged in the form of debit and credit columns placed side by side and prepared with the object of checking the arithmetical accuracy of ledger postings.
Trail Balance in Accounting
Trail balance is the link between the final accounts and ledger accounts. It is prepared by the accountant as on the date of accounting period is closed. When there is a trial balance prepared as on the last date of the accounting year and the balances of all the ledger accounts are found in a single list, which will facilitate the quick and easy preparation of final accounts. From below picture you can see example of trial balance. You can easily understand really what the trial balance worksheet shows.
Purpose of Trial Balance
- The main purpose is acts as the first step in the preparation of financial statements. It is a working paper that accountants use as a basis while preparing financial statements.
- It ensures that for every debit entry recorded, a corresponding credit entry has been recorded in the books in accordance with the double entry concept of accounting.
- It ensures that the account balances are accurately extracted from the accounting ledgers.
- It also assists in the identification and rectification of errors.
Post Closing Trial Balance Advantages
The advantages of the trial balance are as follows
- It helps to ascertain the arithmetical accuracy of the book-keeping work done during the particular accounting period.
- It supplies in one place ready reference of all the balances of the ledger accounts.
- It is one of the basis on which final accounts are prepared.
- It ensures that the transactions recorded in the books of accounts have identical debit and credit amount.
- Balance of each ledger account has been computed correctly.
Adjusted Trial Balance Explanation – Points are to be noted
- Date on which trial balance is prepared should be mentioned at the top.
- Name of Account column contains the list of all ledger accounts.
- Ledger folio of the respective account is entered in the next column.
- In the debit column, debit balance of the respective account is entered.
- Credit balance of the respective account is written in the credit column.
- The last two columns are totalled at the end.
- Accounts of all assets, expenses, losses and drawings are debit balances. Accounts of incomes, gains, liabilities and capital are credit balance.
Originally posted 2015-01-29 12:07:41.