TRIAL BALANCE Trial Balance is a statement prepared periodically from the balances taken from the differen ledger accounts on a particular day so as to verify arithmetical accuracy. Since the entire system of accounting is based on the double entry system, it should have debit and credit totals equal to each other in the ally’ the business transactions are first recorded in the books of original entry (Joumal/subsidiary books) and then posted to ledger accounts concerned. At,the end of the accounting period these ledger accounts are closed or balanced. A list of these ledger accounts with its debit/credit balance is prepared to make sure that posting has been done correctly. Hence trial balance ts not a part of any journal entry or ledger account, it_is simply a summary of various debit and credit balances pertaining to all the accounts operated and maintained by a business enterprise. It serves the following objectives : = ome absence of any error. In 1. To provide arithmetical accuracy of various ledger accounts. To provide base for preparing final accounts. To provide ‘at a glance information’ relating to ledger accounts since it gives the net impact of numerous transactions taken place during an accounting period. Methods of preparing Trial Balance Ye There are three methods of preparing trial balance : (1) Total Method (2) Balance Method (3) Total-cum-Balance or Compound Method. 1. Under Total Method debit totals and credit totals of each account are transferred to the trial balance without finding out the difference of the two sides. The excess of debit side over credit side or vice versa is automatically adjusted and both the sides tally. For example if the total of debit items of cash account is Rs. 1,25,000 and the total of credit items is Rs. 95,000, these both totals will be shown in the trial balance to their respective side as given below. TRIAL BALANCE Particulars Debit Credit Cash 1,25,000 95,000 Thus both the totals of each ledger account will be taken to trial balance to make both the sides, debit and credit, in agreement with each other. Scanned with CamScannerSe i ‘i a s id credit, of each ledger account is taken to the trial balance. The excess of debit total over credit is put to the debit column and the excess of © ‘over 7m dit total over debit ss ¥ debit items is put to credit column of the trial balance. Taking the above example of ‘cash accoun: rial balance will sho 000 as debit balance. ‘Under Third Method Trial Balance is prepared by taking totals as well as balances from each ledger account, Scanned with CamScanner