A trial balance is not an account but a list of balances extracted form the
ledger to test the arithmetical accuracy of the ledger entries. It
is a statement containing the
various ledger balances on a particular
date.
The statement is prepared in the form of schedule containing two columns (One for debit balances, the other for credit balances ). If the books of accounts are arithmetically accurate, then the two sides of the trial balance must tally.
The statement is prepared in the form of schedule containing two columns (One for debit balances, the other for credit balances ). If the books of accounts are arithmetically accurate, then the two sides of the trial balance must tally.
The trial balance however, proves only one aspect of
the ledger accounts ie . the
equality of debit and credit entries. It does not prove that transactions
have been correctly analyzed and
recorded in the proper accounts. Despite
this limitation however, the trial balance serves the following purposes:
a. It
provides proof for the
arithmetical accuracy of the accounting
entries
b. It forms the basis for preparing
the financial statement such as the
profit and loss account and the balance
sheet, and
c. It summarizes the entire ledger
accounts thereby making it possible for
the position of a particular account to be judged simply by looking at the
trial balance
A profoma of a trial balance is as follows:
TRIAL
BALANCED
Particulars
|
Debit
|
Credit
|
N/B (1) all debit balances in the ledger are listed in
the debit column of the trial balance and
(2) all credit
balances in the ledger are listed in the credit column of the trial balance.
Illustration:
Assume the same
information as in question number four
above, extract the trail balance
from the ledger .
Trial balance
Particulars
|
Debit
|
Credit
|
Cash
|
91,000
|
|
Bank
|
117,550
|
|
Capital
|
136,00
|
|
Sales
|
208,00
|
|
Okeafor’s account
|
10,000
|
|
Purchases
|
75000
|
|
Advertising
|
1000
|
|
Rent
|
5000
|
|
Mohammed
|
8500
|
|
Repairs
|
5000
|
|
Assets (machine)
|
10000
|
|
Wages and salaries
|
40000
|
|
Discount allowed
|
1450
|
|
Discount received
|
500
|
|
354500
|
354,500
|