The meaning and purpose of an entity trial balance

Why may a trial balance not contain up-to-date and complete financial information? Why do accrual basis financial statements provide more usual information than cash-basis statements? Who are internal users of accounting data? How does accounting provide relevant data to these users?

Who are external users of accounting data? Which accounts are most important and which are least important on the asset side of a bank's balance sheet? What uses of financial accounting information are made by investors and creditors? What is the present value of Rs. What is the monetary unit assumption? What is the economic entity assumption? What is the basic accounting equation?

What is the accounting cycle? What is business Risk? What is accounting? Trial balance objective Features of trial balance Type of trial balance How to prepare a trial balance Trial balance example and format Forms of trial balance What accounts do we find in trial balance? What is trial balance?

To ascertain the arithmetical accuracy of ledger accounts: As a summary of all the ledger accounts closing balance, trial balance helps in determining the accuracy of journal and ledger posting. Helps to locate errors If there any difference in the trial balance, it signals that journal or ledger posting is not carried out efficiently.

Posting journal entries to the ledger account Totaling of subsidiary books Calculation errors Posting of Balance from Ledger account to trial balance Error in totalling Trial balance and so on Helps to prepare financial statement Trial balance is a bridge between accounting records and financial statements.

Features of trial balance It is a summary of debit and credit balances which are extracted from various ledger accounts It is a summary of debit and credit balances The motive behind the preparation of Trial balance is to establish arithmetical accuracy of the transactions recorded in the Books of Accounts Trial balance does not prove any arithmetical accuracy of accounts which can only be determined by the audit It is not an account.

It is only a statement of account It is not a part of the final statements A Trial balance at the end of the accounting year but it can also be prepared anytime as and when required like weekly, monthly, quarterly or half-yearly It acts as a bridge between books of accounts and the Profit and Loss Account and Balance sheet Type of trial balance There are different types of trial balance prepared at different stages of the accounting cycle. How to prepare a trial balance? Following are the steps to prepare trial balance: Preparing ledger accounts to determine the closing balance of each account.

Post the ledger Accounts into trial balance and place the balance in the debit or credit column. The format of the trial balance is explained in the next section. All the assets and expenses should have debit balance while liabilities and income should have a credit balance.

Calculate the total of the debit balance Similarly, compute the total of the credit column Finally, the sum of debit balance should match the sum of credit balance. The purpose of a trial balance is to ensure that all entries made into an organization's general ledger are properly balanced.

A trial balance lists the ending balance in each general ledger account. The total dollar amount of the debits and credits in each accounting entry are supposed to match. Therefore, if the debit total and credit total on a trial balance do not match, this indicates that one or more transactions were recorded in the general ledger that were unbalanced.

From a practical perspective, accounting software packages do not allow users to enter unbalanced entries into the general ledger. This is the reason why accountant need to prepare trial balance. In short, trial balance is prepared for the purpose of identifying and detecting errors that enter in general ledgers.

It is also use as the working papers for accountant and auditors in drafting financial statements. As mentioned above, if the debit side is over the credit side, that mean the accounting entry is not mathematically correct.

In this case, accountant need to double check his accounting entries and classification.