Format of the Trial Balance

 

Format of the Trial Balance

INTRODUCTION

Arrangement of preliminary equilibrium is the third stage in the bookkeeping system. In the wake of posting the records in the record, an assertion is ready to show independently the charge and credit adjusts. Such a proclamation is known as the preliminary equilibrium. It might likewise be ready by posting every single record and entering in isolated segments the aggregates of the charge and credit sides. However it is ready, the aggregates of the two segments ought to concur. An arrangement shows sensible exactness of the bookkeeping work; on the off chance that the different sides disagree, then, at that point, there is basically a math blunder. This follows from the way that under the Double Entry System, the sum composed on the charge sides of different records is generally equivalent to the sums entered on the credit sides of different records as well as the other way around. Thus the aggregates of the charge sides should be equivalent to the sums of the credit sides. Likewise, the charge adjusts will be equivalent to the completion of the credit adjustments. When this understanding is laid out, there is sensible certainty that the bookkeeping work is liberated from administrative mistakes, however, it isn't verification of penny percent precision, since certain blunders of guideline and repaying mistakes might in any case remain. For the most part, to check the number-crunching precision of records, a preliminary equilibrium is ready at month-to-month stretches. But since the twofold section framework is followed, one can set up a preliminary equilibrium whenever. However, a preliminary equilibrium can be ready whenever it is desirable over set it up toward the finish of the bookkeeping year to guarantee the number juggling exactness of the relative multitude of records before the readiness of the budget summaries. It very well might be noticed that the preliminary equilibrium is an assertion and not a record. we give the format of Trial Balance for your Knowledge.

OBJECTIVES OF PREPARING THE TRIAL BALANCE

The preparation of trial balance has the following objectives:

(i) It should, however, be borne in mind that it does not disclose all the errors in Book Keeping but only the arithmetical inaccuracies.

(ii)The Trail Balance offers a summary of the Ledger. The Ledger may have to be referred to only when more details are required in respect of an account.

(iii) The Trail Balance helps in locating errors in Book Keeping Work. It should, however, be borne in mind that it does not disclose all the errors in Book Keeping but only the arithmetical inaccuracies.

(iv) It helps to prepare a Balance sheet at the end of the Financial year.

The form of the trial balance is simple as shown below: The undermentioned points may be noted:

(i) A trial balance is prepared on a particular date which should be mentioned at the top.

(ii) After that the name of the account is to be painted.

(iii) Total Amount of the debit side column is treated as a debit balance under this account. 

(iv) In the next column, the total of the credit side of the credit balance is written.

(v) The two columns are totaled at the end.

(vi) The first and third column needs no explanation. 

LIMITATIONS OF TRIAL BALANCE

One should note that the agreement of Trial Balance is not conclusive proof of accuracy. In other words, in spite of the agreement on the trial balance some errors may remain. These may be of the following types:

(i) Transaction has not been entered at all in the journal.

(ii) A wrong amount has been written in both columns of the journal.

(iii) A wrong account has been mentioned in the journal.

(iv) An entry has not at all been posted in the ledger.

(v) Entry is posted twice in the ledger.

Still, the preparation of the trial balance is very useful; without it, the preparation of the financial statement, the profit and loss account, and the balance sheet, would be difficult.

METHODS OF PREPARATION OF TRIAL BALANCE

👉1. TOTAL METHOD

Under this method, every ledger account is totaled and that total amount (both on the debit side and credit side) is transferred to the trial balance. In this method, the trial balance can be prepared as soon as the ledger account is totaled. Time taken to balance the ledger accounts is saved under this method as the balance can be found in the trial balance itself. The difference in totals of each ledger account is the balance of that particular account. This method is not commonly used as it cannot help in the preparation of financial statements.       

 👉2. BALANCE METHOD

Under this method, every ledger account is balanced and those balances only are carried forward to the trial balance. Financial Statements are to be prepared with the help of this method. It is prepared on the basis of the balances of the ledger accounts.

A SUSPENSE ACCOUNT IS CREATED WHEN FOUND ANY ERROR OR UNCLEAR ENTRY IN THE TRIAL BALANCE

If the trial balance does not agree after transferring the balance of all ledger accounts including cash and bank balance and also errors are not located in a timely, then the trial balance is tallied by transferring the difference of debit and credit sides to an account known as suspense account. This is treated as a temporary account after finding the error, this entry is to be adjusted in the trail Balance. 

 RULES OF PREPARING THE TRIAL BALANCE

While preparing the trial balance you should follow this rule properly.

The format of the Trial Balance is as follows:

Particular	L.F.	Debit (Dr.)	Credit (Cr.)
1. All Assets and Expenses/Losses are debited. Assets of the owner Drawings Debtors Expenses and Losses  2. All Liabilities and Income/Gains are credited. Capital and Other Liabilities Creditors Loans Income and Gains TOTAL		XX XX XX XX	XX XX XX XX
		XXX	XXX

 

Important Points of Trial Balance: 

We are provided the following data which is to be recorded in Trail Balance. It is helpful for the students who want to acquire knowledge about it. 

Side Entries

Credit Side Entries

Opening Stock           Plant & Machinery           Furniture & Fixture            Land & Building            Residential Flat & Building            Office Flat & Building            Office Equipment            Office Care & Personal vehicles            Discount Allowed            Staff Wages, Salary & Bonus            Employer Contribution to Provided                   Fund            All types of Allowances            Purchase            Interest Paid           Payment of EMI            Carriage Outward           Sundry Debtors            Bad Debts            Cash at Bank & Cash in Hand            Commission Paid            Return in word (Sales Return)            Investment           Jewelry & Ornaments            Depreciation            Closing Stock (when adjusted with                    purchase)                General Expenses           Trade Expenses           Loan Provided to Friends & Relatives

Bank Overdraft         Sundry Creditors         Carriage inward         Sales         Discount Received         Interest Received         Bed debt Recovery         Capital         Drawing         Commission Received         Return Outward (Purchases Return)         Provision for doubtful debts                    Provision for Depreciation         A loan is taken from Friends &

Actual Facts of Closing Stock entry:

If the total purchase amount is to be taken under the trial balance then you do not need to take the closing stock balance in the trial balance, because when closing stock is adjusted with purchase. It means an additional purchase shown in this question, but its amount is already included under purchase.

What is a Trial Balance?

Trial Balance is a statement of account that prepairs in the Ledger and cash Book showing either the balance of the total accounts of debit and credit items.

What is the main objective of preparing a Trial Balance?

The main objective of preparing a Trial Balance is to verify the arithmetical accuracy of accounting entries.

When is Closing Stock Shown in the Trial Balance?

Closing Stock has shown in the trail Balance if the closing stock is adjusted against the purchases.

Why suspense account is to be opened?

When found any error or unclear entry is not understood, then a suspense account is to be opened.

Is a Trial Balance helps to prepare a Balance Sheet?

Yes, a Trial Balance helps to prepare a Balance Sheet for the concern at the end of the Financial Year.