Top ads from clicksor

Monday, January 4, 2010

Objectives of Trial Balance

  1. To check arithmetical accuracy: Trial balance helps ot check the arithmetical accuracy. If the debit total of trial balance is equal to credit total, it proves that books of accounts are arithmetically accurate. However, disagreement of trial balance narrates us that there are some errors in the books of accounts.
  2. To detect the errors: Disagreement of trial balance simply indicates that there are some acounting errors that must be detected and rectified before final accounts are perpared. Trial balance helps to detect some errors like woring totaling and balancing of ledger accounts, wrong side and amount posting, posting of wrong balance in trial balance etc. However, it is required to note that all the errors are not revealed or disclosed by trial balance.
  3. To server as base for the preparation of final accounts: Final accounts are prepared on the basis of trial balance. A corect trial balance assures us to prepare the true final accounts. A trial balance itself is a summary of ledger balance where all the balances of all ledger accounts are available at one place. It facilitates the accountants to prepare final accounts.

Trial Balance

As per accounting process, financila transactions are firstly entered in primary book or journal and then they are posted to various concerned ledger accounts. Finally, they are transferred to final accounts. Before preparing final accounts, it is necessary to know that the books of accounts are accurate or not because a number of mistakes may have been committed while entering in primary books or posting them in ledgers. The "dual aspect" of book-keeping states that every transaction has two aspects i.e. debit and credit. Therefore, the debit balances of all the ledger accounts must be equal to credit balances. For this purpose, a statement is prepared at the end of a certain period, say monthly, half-yearly by taking debit and credit ledger balances which is called trial balance. It is prepared to check arithmetical accuracy of books of accounts. If the debit totla of trial balance is equal to credit total, it is assumed that there are no errors in the books of accounts. However, disagreement of the total of debit and credit side in the trial balance indicates that books of accounts are not maintained properly and errors have been committed. In other words, it is a statement rather than an account. It is prepared to test the accuracy for the preparation of final accounts.

Your Luck Goes Here

Search your luck

Search Term:


Add to Technorati Favorites