Question

what is a trial balance and what are some limitations of a trial balance?

Answer 1

Trial balance is T shape account prepared using closing balances of all general ledgers. All transactions takes place during the year are posted from journal to ledgers and then balances of all ledgers i.e debit or credit posted to trial balance .So it is a list shows all balances of ledger accounts used for preparation of financial statements like profit and loss account, balance sheet for ascertain financial position of the organization.

Limitations are:

1. Trial balance cannot protect error of omission.

2. It does not prove that ledger balances are correct.

3. Sometimes error of compensation takes place .

4. It does not prove that all entries are recorded.