Page 121 - DMGT104_FINANCIAL_ACCOUNTING

Rupesh Roshan Singh, Lovely Professional University Unit 7: Trial Balance

Unit 7: Trial Balance Notes

CONTENTS
Objectives
Introduction

7.1 Meaning of Trial Balance
7.1.1 Objects and Functions of Trial Balance
7.2 Methods of Preparation of Trial Balance

7.3 Types of Errors
7.4 Summary
7.5 Keywords
7.6 Review Questions
7.7 Further Readings

Objectives

After studying this unit, you will be able to:
 Understand the preparation of trial balance
 Identify the types of errors
 Distinguish the errors which are revealed and not revealed by the trial balance

Introduction

Every transaction which takes place in the business is recorded either in the journal or in the
subsidiary books. It is posted in the concerned accounts. After posting is over, final accounts are
prepared in order to know the operational results of the business during a particular or fixed
period and also to depict financial position of the business on a particular date. Final accounts
can be prepared only if information relating to balances of all accounts is available. This function
of supplying necessary and accurate balances is performed by Trial Balance so it is very much
necessary to know the meaning of Trial Balance.

7.1 Meaning of Trial Balance

Trial balance is a list in which all the balances of the accounts of Ledger are showed to test
the arithmetical accuracy of the posting in ledger. It is prepared after the end of a particular
period – year, half year or quarter. Trial balance prepares a base for the preparation of final
accounts. After the completion of trial balance, the financial accounts - P&L Account and Balance
Sheet are prepared to disclose the overall results of the business after a period. The proforma of
a trial balance is given hereunder:
Proforma of Trial Balance

S. No. Particulars Amount Dr. ( ) Amount Cr. ( )

LOVELY PROFESSIONAL UNIVERSITY 115