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PREPARATION OF TRIAL BALANCE

taken out from ledger .DEFINITION OF TRIAL BALANCE According to Carter . It also includes the balances of cash and bank taken from cash book”. “ Trial Balance is the list of debit and credit balances . .

2) It is just a statement . and not an account 3) It is neither a part of double entry system . .FEATURES OF A TRIAL BALANCE 1) It is a list of balances of all ledger accounts and the cash book . nor does it appear in the actual books of accounts . It can be prepared at any time during the accounting period .

5) It is always prepared on a particular date and not for a particular period . 6) It is prepared to check the arithmetical accuracy of the ledger accounts . the total of all debit balances of a trial balance will be equal to the total of all credit balances . 7) If the books are arithmetically accurate . 8) A tallied Trial Balance is not a conclusive proof of the accuracy of the books of accounts .

4) To help in the preparation of Final Accounts .OBJECTIVES OF PREPARING TRIAL BALANCE 1) To ascertain the arithmetical accuracy of the ledger accounts . 2) To help in locating errors . 3) To obtain a summary of the ledger accounts . .

PREPARATION OF A TRIAL BALANCE There are two methods for the preparation of a trial balance – 1) Balance Method 2) Total Amount Method .

it is not included in trial balance . If an account shows no balance . A Trial Balance prepared by this methos shows the total amounts of debit items and the credit items in each ledger account instead of their balances . It can be prepared immediately after the completion of posting to the ledger .Trial Balance by Balance Method Trial Balance by Total Amount Method 1) A Trial Balance prepared by this method shows the balances of all the ledger accounts . A Trial Balance prepared by this method considers all the accounts in the ledger . 3) It can be prepared only when all the ledger accounts have been balanced . 2) A trial Balance prepared by this method considers only those accounts which show a balance .

TYPES OF ERRORS 1)Errors affecting Trial Balance 2) Errors not affecting the Trial Balance .

9. 3. 6. 8. Posting only one aspect of the journal entry in the ledger Posting a journal entry to the wrong side of an account Posting of wrong amount in one account and correct in another 4. Omitting writing the balance of an account in the Trial Balance. Errors of Partial Omission Double posting in a single account Errors of totaling and balancing of accounts in the ledger . Writing the balance in the wrong column of Trial Balance Totalling the Trial Balance wrongly . 5. 7. 2.ERRORS AFFECTING TRIAL BALANCE 1.

ERRORS NOT AFFECTING TRIAL BALANCE 1) Errors of Complete Omission 2) Errors of Commission – Errors of recording 3) Compensating Errors 4) Errors of Principle 5) Errors of posting the correct amount in the correct side but in the wrong account .

.g. credit sales recorded in sales account but not in party account. • Partial Omission e.Errors of Omission • If a transaction is not recorded in the books of account or a transaction recorded in the journal is not posted in the ledger.

Errors of Comission • Errors of Recording – transaction is incorrectly recorded in the books of original entry • Errors in Casting – when a mistake is committed in totaling. • Error of Posting – information recorded in journal incorrectly entered in the ledger .g. e. posting of balance of sales account of Rs 10.050 as Rs 10500. .

Error of Principle When a transaction is recorded in contravention of accounting principle. . e. expenditure on installation of machinery being treated as revenue expenditure rather than capital expenditure.g.

e.g. Shyam’s account debited with Rs 100 instead of Rs 1000 while Ram’s account debited with Rs 1000 instead of Rs 100. .Compensating Errors Those errors the effect of which is nullified by another error of equal amount.