Question

State whether the following statements are True or False:
Preparation of trial balance helps in locating an error of principle.

• A. True
• B. False

Answer 1

The correct option is B False

A trial balance is a statement showing the balances, or total of debits and credits, of all the accounts in the ledger with a view to verify the arithmetical accuracy of posting into the ledger accounts. Trial balance is an important statement in the accounting process, which shows the final position of all accounts and helps in preparing the final statements.

When a trial balance does not tally (that is, the totals of debit and credit columns are not equal), at least one error has occurred. The error (or errors) may have occurred at one of those stages in the accounting process: (1) totaling of subsidiary books, (2) posting of journal entries in the ledger, (3) calculating account balances, (4) carrying account balances to the trial balance, and (5) totaling the trial balance columns.

Hence, the preparation of trial balance helps in locating errors, not only error of principle.