Posted by: slang in k. Trial Balance
A Trial Balance is a list of debit and credit balances extracted from the accounts in the ledger at a particular date.
- An account has a debit balance when its debit total exceeds its credit total
- Assets, expenses and drawings accounts have debit balance.
- An account has a credit balance when its credit total exceeds its debit total
- Liability, capital and revenue accounts have credit balances.
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Purpose of Trial Balance
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The main purpose of preparing a Trial Balance is to prove the mathematical equality of debits and credits.
- The rationale for the balancing of the debit and credit in the Trial Balance is in compliance with the double-entry system of recording, if a debit and a credit entry have been made for each transaction, the total of the debits should be equal to the total of the credits in the recording process. And naturally, when ALL the accounts are balanced and compared, the TOTAL of the DEBIT balances should equal to the TOTAL of the CREDIT balances.
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Other Salient Points:
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- It is prepared in each financial period as a summary of the closing of the previous ledger which proves the arithmetic accuracy of the ledger entry.
- In bookkeeping, this is a useful tool for checking the accounting entries prior to doing the period-end processing.
- Trial Balance reflects all the activity for an account or accounts within a selected date range. It shows the balance of the account at the beginning of the date range, the activity within the date range, and the balance at the end of the date range.
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This entry was posted on Thursday, October 25th, 2007 at 7:23 am and is filed under k. Trial Balance.
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