Trial Balance

• A trial balance is a financial report showing

the closing balances of all accounts in the
general ledger at a point in time. Creating a
trial balance is the first step in closing the
books at the end of an accounting period.
 Advantages of Trial BALANCE
• 1. It helps to ascertain the arithmetical accuracy of books of accounts
• 2. To facilitate the preparing the financial statements, to finalize the accounts.
• 3. It aids in summarizing the financial transactions & consolidating ledger account balances
• 4. It helps to identify & rectify the errors, omission of transactions
• 5. To ensure that ledger posting is done correctly, extracting ledger account balances
• 6. It helps the auditors to conduct the audit in a smooth & fair manner
• 7. It helps to make the decisions by comparison of ledger account balances with the prior
period.
• 8. To assist in passing adjustment entries, closing entries at the year-end
• 9. To assist the management in the preparation of a financial budget for the upcoming
accounting periods
• 10. It ensures that the total of debit balance are equal to total of credit balances.
 Disadvantages of Trial Balance
• 1. It does not prove that all the transactions have been recorded in the books
of accounts. There may be transactions omitted to be recorded in the Journal.
• 2. It cannot assure that the Ledger is correct and reliable. There may be errors
committed in Ledger while posting or balancing the ledger accounts.
• 3. It cannot find the missing journal entries in the Journal because there may
be transactions omitted while recording the transactions.
• 4. It cannot locate the duplicate entries booked in the journal. There may be
entries recorded twice in Journal that cannot be detected.
• 5. It cannot identify the errors committed while recording the transactions in
the books of accounts. These errors may be error of omission, error of
commission, principle errors, or compensating errors.