Академический Документы
Профессиональный Документы
Культура Документы
Trial Balance
What is Trial Balance?
TrialBalanceisthelistofallthebalancesappearingintheledgeraccountsandcashbookatanygiven date. Thebalancesintheledgeraccountmaybeeitheradebitbalanceoracreditbalance.Thedebitbalances areenteredinonecolumnandcreditbalancesinanother. Whentotaldebitsareequaltototalcredits,itissaidthatthetrialbalanceisbalanced.Balancedtrial balanceisonlyanindicationthatthereisanarithmeticalaccuracyofaccounts.Thereisnoguaranteethat therearenoerrors,oncetrialbalanceistallied.
Characteristics
Itisastatementoralist. Itisasummaryofallaccounts,withdebitandcreditbalances. Thetotalofdebitbalancesandcreditbalancesmustbeequal. Itistheonlybaseforpreparationoffinalaccounts. Itcanbepreparedatanytime.
Advantages
Preparationoffinalaccountsbecomeseasy. Onecanrelyontheresultsderivedoutoftrialbalance,whenthetotalofdebitsisequaltothetotal ofcredits. Someaccountingflawsinrespectofpostingscan,easily,bedetectedbypreparingtrialbalance. Theworkofanaccountantbecomeseasyforascertainingtheprofitabilityandfinancialposition withthepreparationoftrialbalance. AccountswithDebitBalances Assets,Expenses,Loss,Drawing 1. AssetaccountsLandaccount,buildingaccount,machineryaccount,andfurnitureaccount,
debtorsaccount,stockaccount,billsreceivableetc 2. Expense&LossaccountsSalariesaccount,wagesaccount,rentaccount,carriageaccount, discountaccount,baddebtsaccount,depreciationaccount,purchasesaccount,returninward account(salesreturnaccount)etc. 3. Drawingaccount AccountswithCreditBalances Liability,Income,Gain,Capital 1. LiabilitiesaccountsCreditorsaccount,loanaccount,mortgageaccount,billspayableaccount, bankoverdraftaccount,alltypesofreservesandfundsaccounts. 2. Income&GainaccountsInterestrealizedaccount,rentcollectedaccount,discountreceived account,salesaccount,returnoutwardaccount(purchasereturnaccount)etc. 3. Capitalaccount
ofmachineryaccountforthewagepaidtothemechanicsusedfortheinstallationof machineanddebitingthecustomer'saccountinsteadofcashaccountforthecashsales made.Errorsofprinciplemayalsooccurduetowrongvaluationofassetsbyhigherlevel staff. Incorrectprovisionfordepreciation,baddebtsordoubtfuldebts. 5. CompensatingErrors Compensatingerrorsrefertotwoormoreerrorswhichmutuallycompensatetheeffects ofoneanother.Ifoneerrorbalancestheeffectofanothererror,thenthetwoerrorare calledcompensatingerrors.Forexample,goodssoldfor$5000,butwronglypostedtothe customer'saccountas$500.Similarly,goodspurchasedfor$5000,butbychance, wronglypostedtothesupplier'saccountas$500.Theerrorsinthepersonalaccountare compensatedbyeachother,as$4500shortonthedebitsideofthecustomer'saccount andonthecreditsideofthesupplier'saccount.
Suspense Account
Unlessthedifferenceinthetrialbalanceisquicklysettled,itisusualtoputthedifferencetoanaccount calledsuspenseaccountinordertobalancethetrialbalance.Ifthedebitsideisshort,suspenseaccount willbedebitedandifthecreditsideisshort,suspendaccountwillbecreditedsaying"differenceintrial balance".Mistakeswhichdonotaffectthetrialbalancearenotenteredthroughsuspenseaccount.When allthemistakeshavebeencorrected,thesuspenseaccountwillshowanilbalance.