Describe
the purpose for the preparation of trial balance.
Describe the purpose for the preparation of trial balance.
The important purposes for the preparation of Trial Balance are explained with the help of the following points.
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Ascertaining the arithmetical accuracy− When the total of all debit balance accounts are equal to all credit balance accounts, it is assumed that at least posting from journal to the respective accounts is arithmetically correct.
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Summarising the ledger accounts− Trial Balance acts as a consolidated statement, providing a comprehensive list of all the accounts. Thus, a Trial Balance provides a summarised version of each account.
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Preparing final accounts− As the Trial Balance provides a summarised version of each account, so different accounts can be directly transferred to Trading, Profit and Loss Account, and Balance Sheet without referring to different ledgers.
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Locating and rectifying errors− If the Trial Balance does not agree, it indicates the occurrence of arithmetical error, which can be easily located. However, Trial Balance only helps in locate and rectify arithmetical error and not other types of errors.
The important purposes for the preparation of Trial Balance are explained with the help of the following points.
-
Ascertaining the arithmetical accuracy− When the total of all debit balance accounts are equal to all credit balance accounts, it is assumed that at least posting from journal to the respective accounts is arithmetically correct.
-
Summarising the ledger accounts− Trial Balance acts as a consolidated statement, providing a comprehensive list of all the accounts. Thus, a Trial Balance provides a summarised version of each account.
-
Preparing final accounts− As the Trial Balance provides a summarised version of each account, so different accounts can be directly transferred to Trading, Profit and Loss Account, and Balance Sheet without referring to different ledgers.
-
Locating and rectifying errors− If the Trial Balance does not agree, it indicates the occurrence of arithmetical error, which can be easily located. However, Trial Balance only helps in locate and rectify arithmetical error and not other types of errors.
