Learning Materials For Accounting, Management , Finance And Economics.

Sunday, June 27, 2010

Concept And Meaning Of Trial Balance

Trial balance is an important statement prepared under the double-entry system. The fundamental principle of the double-entry system is that for every amount of debit there is an equal amount of credit and vice verse. This principle provides a check on arithmetical accuracy of the recording of financial transactions in different books such as journal and the ledger. Such a check can be performed by preparing a statement called trial balance. Trial balance is a statement prepared taking up the debit and credit totals or balances of all ledger accounts on a particular date.

Trial balance is a statement which is prepared by using the debit and credit totals or balances of all ledger accounts with a view to ascertain the arithmetical accuracy of the recordings of the financial transactions of the business. Trial balance is prepared after closing all the ledger accounts and drawing balances therefrom a certain date. All the debit and credit totals or balances are arranged in debit and credit column together with the heads of account in a separate sheet of paper so as to ascertain whether the totals of debit and credit columns agree. If the two totals of trial balance agree, it is assumed that recordings of financial transactions in the journal and the ledger are arithmetically accurate. The trial balance can also be used to prepare the final accounts of the business.