Trial Balance Format PDF Free Download

Trial Balance Format PDF Download Info

In The Previous Chapters, You Have Studied The Basics Of Accounting, Which Include The Assumption That For Every Debit, There Must Be An Equal Credit. As Such, It Is Assumed That All Debit And Credit Amounts Posted To The Ledger Are Accurate If The Total Of The Debits Equates To The Total Of Credits.

Thus, One Of The Methods Of Verifying If Debit And Credit Amounts Are Accurate Is The Use Of A Trial Balance. It’s An Arithmetic Check Under The Double Entry System That Confirms Two Sides Of Every Transaction Have Been Properly Entered. This Chapter Describes The Purpose Of A Trial Balance, How It Is Prepared, The Many Kinds Of Faults That May Occur, And How To Fix Them.

Trial Balance Format PDF Free Download

A Trial Balance Is A Statement Including All Of The Balances Of Ledger Accounts, Either Directly By Balances Or By The Sum Of Their Debit And Credit Aspects. A Trial Balance Is An Important Statement In The Accounting Cycle, As It Helps In The Preparation Of Final Statements And Presents The Final Status Of Each Account.

This Makes The Work Of The Accountant Easier As He Does Not Have To Go Through The Whole Ledger To Prepare The Statements—only Taking The Trial Balance’s Balances For Each Account. I Should Note That Very Often, The Account Balances Are Used To Produce The Trial Balance.

As Mentioned Earlier, One Of The Objectives Of Preparing A Trial Balance Is That It Ensures That All Accounts Are Balanced Properly And All Debits And Credits Have Been Transferred Properly Into The Ledger. In Other Words, It Is A List Of Accounts With Their Balances, Which In Essence Are Summarized From The Ledger.

If The Sum Of All The Debit Balances And Credit Balances In The Trial Balance Are Equal, Then It Is Assumed That The Posting And Balancing Of Accounts Are Mathematically Correct.

However, The Fact That The Trial Balance Agrees Does Not Constitute Conclusive Proof Regarding The Validity Of The Reports. It Only Proves That Every Single Debit And Its Corresponding Credit Have Been Copied Without Mistake Into The Ledger.

We Know That At Least One Error Has Occurred If A Trial Balance Does Not Agree, Where The Totals Of The Credit Column And The Debit Column Are Not Equal To Each Other. Those Steps In The Accounting Process—totalling Subsidiary Books, Publishing Journal Entries In The Ledger, Computing Account Balances, Carrying Account Balances To The Trial Balance, And Totalling The Trial Balance Columns—may Have Been The Site Of The Error, Or Errors.

Some Errors Do Not Affect The Equality Of Debit And Credits, So It Is Not Necessarily A Guarantee That The Accounting Is Accurate When The Total Of The Debit Balances Equates To The Total Of The Credit Balances.

For Example, At The Journal Entry Preparation Stage Or In Posting One To The Ledger, The Correct Amount May Be Deducted In The Wrong Account By The Bookkeeper. One Of These Errors In Calculation Would Mean That Two Accounts Would Have Incorrect Balances, Yet The Trial Balance Would Be Correct.

Another Error Is Recording An Equal Debit And Credit Of An Incorrect Amount. In Such A Case, Two Accounts Would Have Incorrect Balances;

However, Debits Would Not Be Unequal To Credits. Due To This, The Agreement Of The Total Of The Trial Balance Does Not Necessarily Indicate That Each And Every Transaction In The Original Recording Books Has Been Properly Recorded And Presented. Agreeing Totals Do, However, Suggest That Several Other Types Of Errors Have Likely Not Occurred.

The Trial Balance Is Considered The Link That Connects The Preparation Of Financial Statements To Accounting Records. A Financial Statement Can Be Prepared Without Referring To The Ledger. As A Matter Of Fact, The Very First Step For Preparing Financial Statements Is To Obtain A Tallied Trial Balance.

All The Accounts Of Income And Expenses As Appearing In The Trial Balance Are Transferred In The Trade As Well As Profit And Loss Account Whereas The Accounts Of Assets, Capital, And Liabilities Are Transferred In The Balance Sheet.

In This Method, The Total Of The Debit Side And The Total Of The Credit Side Of The Ledger Are Computed And Presented In The Debit Column And The Credit Column Respectively, Of The Trial Balance.

Since Trial Balance Is Prepared On The Basis Of Double Entry System, The Total Of The Debit Column And Total Of The Credit Column Of The Trial Balance Must Agree. This Method Is Not Used In Practical Life As It Does Not Serve Anything To Check The Accuracy Of The Accounting Balances Or Preparing The Financial Statements.

This Is The Most Commonly Used Method In Practice. This Method Prepares The Trial Balance By Showing The Balance Of Each Account Of The Ledger, And The Total Of The Debit Column And Credit Column Of The Trial Balance To Ensure Accuracy.

Account Balances Are Useful In That They Aid In The Preparation Of Financial Statements As They Summarize The Net Impact Of All Transactions Pertaining To A Given Account. In A Trial Balance, A Figure Which Represents Various Debtors Normally Replaces Balances Of The Individual Debtor Accounts While A Figure Representing Creditors Replaces The Balances In The Respective Creditor Accounts.

This Technique Is A Combination Of The Balances Technique And The Totals Technique. Four Columns Are Prepared For The Amount In This Process. There Can Be Two Columns To Record The Debit And Credit Balances Of These Accounts And Two Columns To Record The Debit And Credit Totals Of Other Various Accounts.

However, As This Requires Too Much Of Labor And Does Not Have Anything Specific Or Special To Offer, This Technique Is Also Not Used In Practice.

With The Aid Of The Following Example, Let Us Now See How Each Of These Methods Will Be Used To Prepare The Trial Balance:

The Following Accounts Are In The Ledger Of Mr. Rawat Of His Business. Help Him In Preparing The Trial Balance By Adopting The Following Techniques: (I) Totals; (Ii) Balances; And (Iii) Totals-cum-balances.