Trial Balance

Trial balance is a statement containing the various ledger balances on a particular date.

Objectives Of Preparing Trial Balance

Checking of the arithmetical accuracy of the accounting entries. Basis of financial statements. Summarized Ledger

Format of Trial Balance

Particular Amount (Dr.) Amount (Cr.)

Methods of Preparing Trial Balance

Total Method Balance Method Compound Method

Total Method

In case of total method, the total of debit and credit of the accounts are shown in the trial balance.

Balance Method

In case of balance method, the balances of the ledger accounts are shown in the respective debit and credit columns of the trial balance.

Compound Method

This is the combination of two methods described above.In this method balances as well as the totals of various accounts are shown in the TB.

Evaluation
The statement containing the various ledger balances on a particular date is known as: (a) Journal (b) Ledger (c) Cash Book (d) Trial Balance (e) Day Book

Evaluation (Cont.)
If the two sides of the trial balance tally, it is the indication of the fact that the books of accounts are : (a) Logically (b) Arithmetically (c) Relatively (d) Comparatively (e) Rationally

Illustrations
Total Method Balance Method Compound Method

Types of Errors

Errors of Omission: are caused at the time of recording the transactions either in the books of original entry or ledger posting.Such errors can classified into two parts:  Errors of complete omission  Errors of Partial omission Errors of Commission: Wrong,Wrong & Wrong. Errors pf Principle: Contravention to accounting Principle.

Detecting Errors in Trial Balance

 Recheck the Totals of the TB Columns.  Ascertain the exact amount of difference.  Divide the difference in TB by 2 and see whether some figure exactly equal to that appears in TB.(Wrong Posting Dr. or Cr.)  If the discrepancy is divisible by 9 most of the times it suggest that figure is wrongly written: example 2136 instead of 2163. Above errors are known as TRANSPOSITION ERRORS. Another example: 217.50 is written as 21.75 or 2175.00. With the help of above technique the search can be narrowed down.  If the difference in total is 1000,100,10 it is very much possible that an error has been made while totaling.