Question

QuickBooks question.

Discuss the purpose of the trial balance and what the organization uses this for. Specifically, how does an organization use the trial balance to prepare for audits and before submitting their financial statements? What individuals would be users of the trial balance?

Answer 1

A trial balance lists out the assets, liabilities, income, expenses and equity accounts of an entity. Trial balance is primarily used to ensure arithmetical accuracy of books of accounts and to verify whether the double entries have been correctly made in the books of accounts.

Before submitting their financial statements, an organisation typically uses the trial balance to ensure that supporting details/explanations are made ready and available to auditors for all material ledger items.It also acts as a control point to determine what details are provided to auditors and what are pending and also keep a track of all audit adjustments at the ledger level. Trial balance is also used by auditors to drill down to the schedules of financial statements in further details, at the bottom level of the chart of accounts.

Individuals using the trial balance would be accountants and auditors. Typically, trail balance is not used by managers and controllers except for purposes as mentioned above as the trial balance does not provided any specific information around profits/losses, grouped asset balances, ratios, etc.

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