In this article let us try to understand about What is Trail Balance? Objectives of Trail Balance and different Methods in which trial balance is prepared.
Trial Balance
We all have seen that an entry has two
effect one on debit side and other on credit side. This aspect technically
known as double entry system in accounts. Thus if we sum up or add debit side and
credit amounts the total of debit and credit side will remain same or gets
tally. Thus a trial balance is a statement where debit and credit side amounts
of a specific period are sum up and the total of debit and credit side is
compared to check if there is any error while passing entries.
In simple words Trial Balance can be referred
as a list of balances both debit and credit side extracted from all the books of accounts including cash, bank balances from cash book.
Objectives of Preparing Trial Balance
§ To check the accuracy of the postings. If both the totals tallies
then all the transactions are correctly posted in ledger.
§ It helps to bring all the balances under one statement that
facilitates preparation of final accounts.
Although even after preparing trial balance there are chances that errors may exist.
Although even after preparing trial balance there are chances that errors may exist.
Methods to Prepare Trial Balance
There are two methods of preparing a
trial balance
§ Totals Method:
In this method sum of debit and credit side of the
ledgers excluding the closing balance is shown in the trial balance.
§ Balances Method:
In this method only the closing balances of the
ledger are shown in the trial balance.
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