What is a Trial Balance? Objective of Trial Balance

What is a Trial Balance?Objective of Trial Balance

Trial Balance Accounting
The fundamental and important aspect of double entry system of book keeping is that for every amount of debit. There should be equal and corresponding credit and vice-versa. When all the journal entries have been posted into ledger. It should be confirmed that every transaction has been entered twice in the ledger. This is done by preparing statement which is knows trial balance. It the accou

nts are properly and accurately maintained, this statement must tally. Thus, a statement prepared to test the arithmetical accurately of the books of account is called trial balance is prepared by taking all the ledger balance to examine the arithmetic accuracy of the ledger accounts. The following definition will help to understand meaning of trial balance more clearly.

Some world famous writer definition that trial balances:
R. Pickles, 'the statement prepared with the help of ledger balances at the end of financial year to find out whether debit total agrees with total is called trial balance.'
Spice and Pegler, 'a trial balance is a list of all the balance standing in ledger accounts and cash book of a concern at a any given date.'
Thus, a trial balance is a schedule of debit and credit totals or debit and credit balance of all ledger accounts drawn at the end of financial year (or at any date) to check the arithmetical accuracy of the transactions recorded. All the debit and credit totals or balance are shown in accuracy of the transactions recorded. All the debit and credit totals or balance are shown in debit and credit column together with heads of accounts with a view to ascertain whether total of debit and credit columns agree. If the two totals of debit balance and credit balance agree, it is assumed that recording of financial transactions in the journal and ledger are arithmetically accurate. Trial balance is a proof of arithmetical accuracy of the transactions recorded in one hand on the other; it is the basis for preparing final accounts.
Objective of Trial Balance
The following are the main objective of trial balance.
To check the arithmetical accuracy of ledger
Trial balance is prepared on the basic of double entry systems of book keeping which states that every debit should have equal and corresponding credit and vice versa, as a result, the sum of the debit totals and credit totals of trial balances must be equal. If so, it is assumed that the financial transaction are accurately recorded. If the debit total does not agree with the credit total, it is assumed that the transactions are not arithmetically accurate. Thus, one of the importance objectives of trial balance is to provide check on the arithmetical accuracy of the financial transactions.
To help in locating accounting errors
Since the trial balance indicates whether there is an error committed in journal or ledger, it helps to locate errors as trial balance is the starting point of locating error. Thus locating error is one of the importance objectives of trial balance.
To provide the summary of transactions

A business organization performs number of financial transaction during a certain period of time. These transaction themselves cannot depict any picture of financial of the business organizations. To fulfill the purpose, the trial balance is prepared which summarized the financial transactions of business in a certain date
To serve as basic for preparing final accounts
Final accounting are prepared to show the operating result and financial position of the business operating result is shown by profit and loss account financial position is depicted by balance sheet. In fact, these statement (profit and loss account and balance sheet) as preparing on the basic of information supplied by trial balance. Therefore, trial balance serves a basis for the preparation n of final accounts.
Importance of trial balance
The following are the main advantage/importance of trial balance.
• It summarizes the financial transaction of the business.
• It helps to check arithmetical accuracy of the recording of financial transaction of the business.
• If help in locating errors.
• It serves as basic for preparation of final accounts of business.
Methods of preparation of trial balance
The following are the two methods of preparing trial balance:
Total method
Under this method, the trial balance is prepared by taking the totals of debit and credit of ledger accounts. The balancing figures of ledger accounts are ignored under total method, if there is n error committed in journal and ledger, the total of debit and credit of the trial balance must agree.
Balance method
Under this method, the balance is prepared by taking the balancing figure of each ledger account. The balances of ledger accounts are entered in debit and credit column of trial balance and it should agree if there is no error committed in the recording of the financial transactions.
Trial balance under total method
The following points should be considered while preparing trial balance under balance method:
1. The assets account always shown debit balance. Hence, all assets should be shown on the debit column of trial balance. For example, cash a/c, bills receivable a/c, furniture a/c, goodwill a/c, prepaid expenses a/c, livestock a/c, debtor's a/c, income receivable a/c, patent a/c.
2. Liabilities and capital always show credit balance. So all liabilities and capital account should be shown credit column of balance. For example; credit's a/c, bills payable a/c, bank overdraft a/c, outstanding expenses a/c, bank loan a/c, advance income account, capital a/c, reserve found a/c, provision a/c etc.
3. All expenses and losses show debit balance. They should be shown on debit column of trial balance. For example: purchase a/c, wages a/c, salary a/c, printing and stationary a/c, insurance a/c, rend paid a/c, discount allowed a/c, interested paid a/c, commission paid a/c, carriage a/c, opening stock a/c, sundry expenses a/c, loss on sale of fixed assets a/c, bad debt a/c.
4. All incomes and gains show credit balance. Therefore, they should be shown on credit column of trial balance. For example; sales a/c, commission earned a/c, discount received a/c, rent received a/c, gain on sale of fixed assets a/c, sundry incomes a/c, interest received a/c.
5. Purchases return shown credit balance and should be shown on the credit column of trial balance.
6. Sales return shows debit balance and should be shown on debit side of trial balance.
7. Drawing shown debit balance and should be shown on debit column of trial balance.
8. In the absence of information, rent, commission, interest, discount are treated as expenses and shown in debit of trial balance.