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    trial balance trial balance Presentation Transcript

    • Trial balance Made by: Shruti
    • What is trial balance? A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns. 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.
    • For example
    • Purpose of trial balance !  Trial Balance 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.  Trial balance ensures that the account balances are accurately extracted from accounting ledgers.  Trail balance assists in the identification and rectification of errors.
    •  Trial balance 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. If the totals of the trial balance do not agree, the differences may be investigated and resolved before financial statements are prepared. Rectifying basic accounting errors can be a much lengthy task after the financial statements have been prepared because of the changes that would be required to correct the financial statements.
    • Features of trial balance!  It is a list of balance of ledger accounts and cash book.  It is not a part of the double entry system of book keeping. It is a result of double entry system of book keeping. It is only a working paper.  It can be prepared on any date.  It verifies the arithmetical accuracy of posting of entries from the journal to the ledger.  It is not a conclusive proof of the accuracy of the books of accounts since some errors are not disclosed by the trial balance.
    • Format! NAME OF ACCOUNT IS WRITTEN PARTICULAR DATE OF PREPRATION Trial balance of m/s_____ as on ____ PARTICULAR L/F DEBIT AMOUNT CREDIT AMOUNT ACCOUNT HEAD ONE --- ---- ---- ACCOUNT HEAD TWO --- ---- ---- ACCOUNT HEAD THREE --- ---- ---- TOTAL --- DEBIT BALANCES ARE WRITTEN **** COLUMNS ARE TOTALLED DEBIT=CREDIT **** CREDIT BALANCES ARE WRITTEN
    • PREPARING A TRIAL BALANCE!  FOR EXAMPLE : we have some ledgers Dr Date CAPITAL A/C particular total --- Date Particular Jan 1 To balance c/d j/f amount Cr j/f amount By cash a/c --- 20000 total 20000 By balance b/d 20000 20000 20000
    • Dr CASH A/C Cr Date Particular j/f Amount Date Particular j/f Jan 1 To capital a/c ---- amount 20000 By balance ---c/d total To balance b/d ---- 20000 20000 20000 total 20000 ----
    •  Now, the capital a/c ledger and cash a/c ledger would be noted down in a trial balance. Trial balance of m/s ______ as on Jan 10,2012 particular L/f Debit credit Cash a/c ---- 20000 ---- Capital a/c ---- ---- 20000 ---- 20000 2000 Total
    • Limitations!  Trial Balance only confirms that the total of all debit balances match the total of all credit balances. Trial balance totals may agree in spite of errors. An example would be an incorrect debit entry being offset by an equal credit entry. Likewise, a trial balance gives no proof that certain transactions have not been recorded at all because in such case, both debit and credit sides of a transaction would be omitted causing the trial balance totals to still agree. Types of accounting errors and their effect on trial balance are more fully discussed in the section on Suspense Accounts.