Question

Why do accountants prepare a trail balance?

Answer 1

Preparation of trial balance will come under the third phase of Accounting process.

After posting the accounts in ledger a statement is prepared that is required to show the debit and credit balances i.e., known as trial balance

It will be helpful for us it shows us if there is any arthimetical errors.

An agreement indicates reasonable accuracy of the accounting work if two sides do not agree then there is an arthimetical error.

we know the fact that , for every debit entry there should be equal credit.

So by preparing trial balance we can find out that total debit is equal to total credits.

Though it is not cent percent perfect becasue of errors of principle and compensating errors.

Trial balance is preferable to prepare at the year end to ensure arthimetic accuracy of all accounts before preparation of financial statements.

Financial statements are normally prepared based on the trial balance , therefore it is considered as an objective of trial balance

It serves as a summary of that contained in ledger account.

Trial balance as at....................................

S.No Ledger account L.F. Debit Credit

Above is the format for preparing trial balance.

A trial balance should be prepared as at particular date which should be mentioned there.

Also there are certain limitations for trial balance such as :

Transaction has not been entered in journal

A wrong account has been mentioned in journal

entry is posted twice

There will be no errors if the above are performed while preparing financial statements and we cant find any mistake in trial balance as there wil be no errors

Still the preparation of trial balance is very useful because the financial statements, profit loss A/c and balance sheet would be difficult.