A Presentation on TRIAL BALANCE

AKHILESH Presented by:-

AKHILESH KUMAR NEHA ALBINA EKKA DEEPAK DANIEL RAHUL DEV

TOPIC CONTENTS
INTRODUCTION PURPOSE FORMAT METHODS BENEFITS LIMITATION

What is TRIAL BALANCE?

Trial Balance is a list of closing balances of ledger accounts on a certain date and is the first step towards the preparation of financial statements. It is usually prepared at the end of an accounting period to assist in the drafting of financial statements.

Trial balance is prepared to check the mathematical/arithmetic accuracy of accounting. 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 for every debit entry recorded, a corresponding credit entry has been recorded in the books in accordance with the double entry concept of accounting. Trail balance assists in the identification and rectification of errors.

FORMAT OF TRIAL BALANCE

Trial Balance (as on )
S. No.

Particulars

L/F

Debit (in Rs.)

Credit (in Rs.)

HEADER: The header consist the detail relating to the name of the organization.
PARTICULAR: Information relating to an account. L/F(Ledger Folio): Information relating to the page number in ledger from which the information is being extracted. DEBIT AMOUNT: Amount whose information is extracted from the ledger amount. CREDIT AMOUNT: Amount whose information is being extracted from ledger amount.

METHODS OF TRIAL BALANCE

There are two methods for preparing TRIAL BALANCE. TRADITIONAL METHOD: The traditional method considers the sub-total of each ledger account. It is prepared by presenting the sub-totals relating to each ledger account in the relevant columns in the trial balance. MODERN METHOD: The modern method considers only the balance of the ledger account. It is prepared by presenting the balance relating to each ledger account in the relevant column in the trial balance.

Benefits of TRIAL BALANCE

Trial balance help confirming the total debit balances and total credit balances of all ledger accounts are equal. Therefore, it is helpful in checking the arithmetical accuracy of ledger accounts.

Trail balance is used while preparing financial statements such as income, balance sheet and cash flow statement since it provides with summary of all ledger accounts. Since trial balance gives the summary of all accounting records or all ledger accounts, we can verify the position of a business by talking a glance at the trial balance.

Limitation of TRIAL BALANCE

A trial balance only checks the sum of debits against the sum of credits. That is why it does not guarantee that there are no errors. The following are the main classes of error that are not detected by the trial balance:Error of omission: when transaction is not at all recorded in the books of accounts, i.e, neither in debit side nor in credit side of account-trial balance will agree. Error of commission: Where there is any variation in figure/amount, e.g. instead of Rs. 800 either Rs.80 or Rs.8000 is recorded in both sides of ledger account- trial balance will agree.

Contd.
Error of principal: An error of principle is when the entries are made to the correct amount, and the appropriate side (debit or credit), as with an error of commission, but the wrong type of account is used. For example, if fuel costs (an expense account), are debited to stock (an asset account). This will not affect the totals. Errors of misposting: When wrong posting is made to a wrong account instead of a correct one although amount is correctly recorded, e.g., sold goods to B but wrongly debited to Ds Account trial balance will agree.

SUMMARY
Trail balance is all about preparation for balance sheet, Trail balance is prepared in order to close the ledger account, while preparing trail balance, it is very important that the total of DEBIT balance must match with the total of CREDIT balance, then only trail balance shows the correct figure, Trail balance will help us during time of preparing financial statement of income, balance sheet and cash flow statement.