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Manpreet Kaur, Lovely Professional University Unit 10: Trial Balance

Unit 10: Trial Balance Notes

CONTENTS

Objectives
Introduction
10.1 Purposes of the Preparing the Trial Balance
10.2 Preparation of Trial Balance
10.3 Methods of Preparing Trial Balance

10.4 Errors
10.4.1 Errors which cannot be Located by Trial Balance
10.4.2 Errors which can be Located by Trial Balance
10.5 Summary

10.6 Keywords
10.7 Self Assessment
10.8 Review Questions
10.9 Further Readings

Objectives

After studying this unit, you will be able to:
z Understand the preparation of trial balance

z Identify the types of errors
z Distinguish the errors which are revealed and not revealed by the trial balance

Introduction

According to the dual aspect concept, the total of debit balance must be equal to the credit balance.
It is a must that the correctness of posting to the ledger accounts and their balances be verifi ed.
This is done by preparing a trail balance.
Trial Balance is a statement which shows balances of all accounts on a particular date. In other
words, trial balance is a schedule or list of balances whether debit or credit, extracted from
the accounts in the ledger including cash and bank balances from the Cash Book. As the name
indicates it is prepared to check the ledger balances. If the total of the debit and credit amount
columns of the trail balance are equal, it is assumed that the posting to the ledger in terms of debit
and credit amounts is accurate. The agreement of a trail balance ensure arithmetical accuracy
only, A concern can prepare trail balance at any time, but its preparation as on the closing date of
an accounting year is compulsory.

10.1 Purposes of the Preparing the Trial Balance

The following are the key objectives of preparing trial balance:
1. To prepare a statement of disclosure of final accounting balances of various ledger accounts

on a particular date.

LOVELY PROFESSIONAL UNIVERSITY 107