What are the objectives and features of trial balances?
Trial balance records and categorizes all the ledger balances into debit and credit in a particular period.
The objectives of trial balances are explained below −
Arithmetical accuracy of transactions is provided, if trial balance is balanced. If it is not balanced, there may be some error and need for rectification.
Error rectification in trial balance refers to the following −
- Postings in various ledger accounts are checked and also their appearances are verified.
- Subsidiary books are checked.
- Opening balances are checked and necessary corrections (if any) are made.
- If the balances are still not balanced, repeat the process.
Trial balance summarises ledger accounts.
Without trial balance final accounts are impossible to prepare. It includes the following −
- Preparation of ledger account.
- Preparation of trial balance.
- Preparation of trading and P&L account.
- Balance sheet.
- Shows company financial position.
The features of trial balances are as follows −
- Trial balance is not an account, it’s a statement only.
- Provides transactions arithmetical accuracy and prepares financial results.
- Trial balance is neither a ledger nor a journal. It is prepared in a new sheet.
- Trial balance is prepared monthly or quarterly or bi-annually or annually.
- Trial balance contains different ledger account balances for a period of time.
- Final accounts are prepared using trial balances.
Published on 09-Jul-2021 13:30:17