Accounting Assignment Help >> Trial Balance & Methods of Preparing Trail Balance

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defining Trail Balance & Methods of Preparing Trail Balance

Fundamental principle of the double entry system is the total of debits must be equal to the total of credits. If the entry is correctly recorded and posted in ledger it will reflect equal balance. Every business prepares final account at the end of the year to get the result of the activities of the whole year. To ensure correct results it must be free from doubts that book of accounts have been correctly recorded throughout the year.

Trial balance is prepared to test the arithmetical accuracy of the book of accounts as it is known that the double entry system for each transaction has equal debit and credit. This verification of equal balance is done through trial balance.

The trial balance is not an absolute or solid proof of accuracy of the books of accounts. If the trial balance agrees there may be errors or may not be errors, but if it does not agree there will be errors.

Trial balance serves to two main purposes

• to check the equality

• to provide information for the preparation of final accounts

There are three methods for preparation of trial balance

• Total trial balance

• Net trial balance

• Total – Cum –balance trial balance

Trial balance is an informal accounting schedule or statement that lists the ledger account balances at a point in time and compares total of debit balances with the total of credit balances. In total trial balance method two sides of ledger account are summed up. Thereafter a list of account is prepared in a separate sheet. Two columns first one for debit amount and second one for credit amount finally the two columns are added to see whether they agree or not. This method is usually in practice.