What is a Trial Balance? State its objectives and characteristics. Give some reasons for disagreement of the Trial Balance.
A 'Trial Balance' is a list of all the General ledger accounts (both revenue and capital) contained in the ledger of a business. This list will contain the name of the nominal ledger account and the value of that nominal ledger account. The value of the nominal ledger will hold either a debit balance value or a credit balance value. The debit balance values will be listed in the debit column of the trial balance and the credit value balance will be listed in the credit column. The profit and loss statement and balance sheet and other financial reports can then be produced using the ledger accounts listed on the trial balance.
The following are the important objectives of trial balance: 1. To Check The Arithmetical Accuracy
Trial balance is based on the double-entry principle of debit equals credit or credit equals debit. As a result, the debit and credit columns of trial balance must always be equal. If they do, it is assumed that the recordings of financial transactions are accurate. Conversely, if they do not, it is assumed that they are not arithmetically accurate. Therefore, one important purpose of preparing trial balance is to provide a check on the arithmetical accuracy of the recordings of the financial transactions. 2. To Help Locate Accounting Errors
Since the trial balance indicates if there is any error committed in the journal and the ledger, it helps the accountant to locate the error because the starting point of locating errors is trial balance itself. 3. To Summarize the Financial Transactions
A business performs several numbers of financial transactions during a certain period of time. The transactions themselves cannot portray any picture of the financial affairs of the business. For that purpose, a summary of the transactions has to be drawn. The trial balance is prepared with a view to summarize all the...
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