After preparing ledger balance it is very essential to test the accuracy of these balances before going to prepare the final accounts. With a view to test the accuracy of ledger balance statement showing all the debit balances on one side and all credit balances on other side is prepared. These two totals must agree with each other. The statements which are prepared to check the arithmetical accuracy of the ledger balance is known as ‘Trial balance’.
If there is any discrepancy between the total of the debit and credit balances, the trader can conclude that there are certain mistakes or errors in posting, carry forward etc.,and he will have to check the posting again to find posting again to find out the reasons for disagreement of Trial-Balance.
J.R.Batliboi described Trial-Balance as ‘a statement of debit and credit balances extracted from the ledger with view to test the arithmetical accuracy of the books’.
A trial balance is ruled in the same way as the journal.
Construction of a Trial-Balance:
Objectives of Trial-Balance:
- It facilitates preparation of final accounts.
- It helps detect errors in the books of accounts. Further It also helps to rectify those errors before the preparation of final accounts.
- It also ensures that the balance of each account whether debit or credit has been transferred properly to the respective column of the trial balance.
- It ensures that the balance in each account has been computed correctly.
Methods Of Preparing Trial-Balance
Trial Balance can be prepared in two ways namely 1. Totals Methods. 2. Net Balance Method.
1. Totals Method:
This method is also known as ‘Gross Trial balance method’.under this method the total of the debit side of an account is posted on the debit side of the trial balance and the total of credit side of an account is posted on the credit side of the Trial-Balance.
2. Net Balance Method:
This method is widely used for preparing a trial balance.Under this method every ledger account must be balanced first. Then the debit balance of the accounts will be posted on the debit side and the credit balances of the accounts will be posted on the credit side.
Points to be remembered in preparing trial-balance:
- All assets,expenses,losses etc.,will be posted in the debit column of Trial-balance.
- All types of reserves and reserves funds will be found listed out in the credit column of trial balances.