TRIAL BALANCE AND CORRECTION OF ERRORS
MEANING OF TRIAL BALANCE
Trial balance is a statement showing a list of balances in a double-entry form extracted from the ledgers to test the arithmetical accuracy of the accounts
LAYOUT OF TRIAL BALANCE
DR # CR#
Capital x
Furniture and fittings x
Land and building x
Stock x
Cash at bank x
Creditors x
Loan x
Provision for doubtful debts x
Bad debts x
Insurance x
Rates x
Sundry expenses x
Premises x
Sales x
Returns inwards x
Returns outwards x
Purchases x
Discount allowed x
Telephone x
Discount received x
Lighting x
Stationery x
Motor expenses x
Drawings x
Carriage inwards x
Salaries & wages x
Bank overdraft x
Carriage outwards x
Accumulated depreciation:land&building x
Equipment x
Equipment at cost x
Rent receivable x
Bills payable x
Bills receivable x
Debtors x
Plant& machinery x
Delivery expenses x
Office expenses x
Travelling expenses x
Petty cash x
Repairs x
Loan interest x
________________
Xx xx
______________
DIFFERENCES BETWEEN TRIAL BALANCE AND BALANCE SHEET
- Trial balance shows list of ledger balances WHILE Balance Sheet is a statement showing assets and liabilities
- Trial balance is prepared to prove the arithmetical accuracy of the ledger accounts WHILE BALANCE SHEET is prepared to show the financial position of a business at a point in time
- In the trial balance , items are classified into debit and credit WHILE in the balance sheet items are classified into assets and liabilities
- Trial balance preparation is at the discretion of the business WHILE balance sheet preparation and presentation is a legal obligation in any business
- Trial balance is used for the preparation of final accounts for which the balance sheet is a part. WHILE BALANCE SHEET is prepared with the balances left after the preparation of the trading profit and loss account
PURPOSE OF TRIAL BALANCE
- Provide a comprehensive lists of all accounts therefore it saves time
- To show the arithmetical accuracy of the entries in the ledgers
- Provide data for the preparation of Trading , profit and loss and balance sheet
RULES OF TRIAL BALANCE
In preparing the trial balance ,the rules below must be followed by the students.