Trial Balance
The fundamental principle of Double entry system is that at any stage , the total of Debits must be equal to the total of the credits. If entries are recorded and posted correctly, the ledger will reflect equal debits and credits, and the total credit balances will then be equal to the total debit balances.
Every business concern prepares final accounts at the end of the year to ascertain the result of the activities of the whole year. To ensure correct result, the concern must be free from doubt that the books of accounts have been correctly recorded throughout the year. Trial balance is prepared to to test the arithmetical accuracy of the books of accounts.As we know that under doule entry system of each and every transaction one account is debited and other is cedited with an equal acmount. If all the transactions are correctly recorded strictly according to this rule, the total amount of debit side of the ledger accounts must be equal to that of credit side of all the ledger accounts. This verification is done through Trail balance.
If the trial balance agrees, we may assume that the books are correct. On the other hand, if it does not agree, it indicates that the books are not correct - there are mistakes somewhere. The mistakes are to be detected and corrected -- otherwise, correct result cannot be ascertained. There are, however, a few types of errors which the trail balance cannot detect. in other words, the trail balance will agree in spite of the existence of those errors.
The trail balance serves two main purposes:
Thus in the light of above discussion a trail balance may be defined as:
"An informal accounting schedule or statement
that lists the ledger account balances at a point
in time and compares the total of debit balances
with the total of credit balances."
Every business concern prepares final accounts at the end of the year to ascertain the result of the activities of the whole year. To ensure correct result, the concern must be free from doubt that the books of accounts have been correctly recorded throughout the year. Trial balance is prepared to to test the arithmetical accuracy of the books of accounts.As we know that under doule entry system of each and every transaction one account is debited and other is cedited with an equal acmount. If all the transactions are correctly recorded strictly according to this rule, the total amount of debit side of the ledger accounts must be equal to that of credit side of all the ledger accounts. This verification is done through Trail balance.
If the trial balance agrees, we may assume that the books are correct. On the other hand, if it does not agree, it indicates that the books are not correct - there are mistakes somewhere. The mistakes are to be detected and corrected -- otherwise, correct result cannot be ascertained. There are, however, a few types of errors which the trail balance cannot detect. in other words, the trail balance will agree in spite of the existence of those errors.
The trail balance serves two main purposes:
1. To check the equality of debits and credits -- an arithmetical or mathematical test of accuracy.
2. To provide information for use in preparing final accounts.Thus in the light of above discussion a trail balance may be defined as:
"An informal accounting schedule or statement
that lists the ledger account balances at a point
in time and compares the total of debit balances
with the total of credit balances."
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