Trial Balance Essay

6085 words - 25 pages

Financial and Management Accounting 

Unit 6 

Unit  6 
Structure  6.1  Introduction  Objectives  6.2  Meaning  Self Assessment Questions 1  6.3  Objectives  Self Assessment Questions 2  6.4  Methods of preparing trial balance: Total Method and Balance Method  Self Assessment Questions 3  6.5  Preparation op Trial balance  Self Assessment Questions 4  6.6  Errors and their rectification  Self Assessment Questions 5  6.7  Errors disclosed by a Trial Balance  Self Assessment Questions 6  6.8  Errors not disclosed by Trial Balance  Self Assessment Questions 7  6.9  Steps to locate the errors  6.10  Trial Balance and adjustments  Self Assessment Questions 8  Terminal Questions  ...view middle of the document...

  4.  To identify and rectify the errors that can be disclosed by trial balance  5.  To identify and rectify the errors that can not be disclosed by trial balance  6.  To know the steps to locate the errors.  7.  To prepare trial balance after incorporating adjustments. 

6.2 Meaning 
Trial Balance is a statement containing the various ledger balances on a particular date. It is used  to verify the equality of debits and credits in the ledger. When the total of debit balances equals  the  total  of  credit  balances,  the ledger  is  said  to  be  in  balance.  A  trial  balance  is  prepared  as  follows: 
ST  TRIAL BALANCE AS ON 31  MARCH, ­ ­ ­ ­ 

Particulars  Cash account  Capital account  Purchases account  Mohan account (creditor)  Sales account  Total  Self Assessment Questions 1 

Debit  Rs.  1,20,000 

Credit  Rs.  1,00,000 

40,000  20,000  40,000  1,60,000  1,60,000 

1.  The purpose of preparing journal and ledger accounts is to prepare __________.  2.  The final accounts include _________, ____________ and ________.  3.  Trial balance is regarded as a bridge between primary and secondary books and  preparation of final accounts (True / False ).  4.  Trial balance contains debit balances and credit balances. (True / False )  5.  If trial balance tallies, balance sheet also tallies. (True / false )

Sikkim Manipal University 

87 

Financial and Management Accounting 

Unit 6 

6.3 Objectives 
There are three objectives of preparing a trial balance.  a)  To  check  the  arithmetic  accuracy  of  entries  made.  In  double  entry,  every  debit  has  an  equivalent credit. Even in General Journal, we have seen that the total of debits equals the  total of credits. Similarly, if the debits and credits tally in a trial balance, it indicates that the  books of account are arithmetically accurate. If the two sides do not tally, it is sure that errors  have crept in.  b)  Basis for financial statements. As stated earlier, trial balance is a bridge between ledger and  final statements. It is only through trial balance, trading account, profit and loss account and  balance sheet are prepared. If trial balance tallies, it means that the final statements should  invariably tally.  c)  It is a summarised ledger. The position of a ledger account be judged simply by looking at the  trial  balance.  It is because,  all ledger accounts, after  being balanced,  are  grouped as those  showing debit and those showing credit balances. They must be equal in value. 

Self Assessment Questions 2  1.  Trial balance checks the arithmetic accuracy of debits and credits ( True / False)  2.  Trial balance is a summary of ledger accounts. So, if ledger accounts are properly prepared  and balanced, trial balance tallies ( True / False). 

6.4 Methods of preparing Trial Balance 
Totals method and Balance method are the two techniques of preparing trial balance. In the first  method,  the  totals  of  debits  and  credits  of  every ...

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