Preparing unadjusted trial balance is the third step in the accounting cycle. It is prepared after general ledger and before the adjusted trial balance.
In this, all the balances of ledger accounts are listed. It is not suitable for preparing financial statements, balance sheets and income statements because it does not comply with Generally Accepted Accounting Standards (GAAP) or International Financial Reporting standards (IFRS).
The purpose of an unadjusted trial balance is to check the debits and credits mathematical equality.
The errors of unadjusted trial balance are due to the following aspects −
Heading at top
Three column are drawn in sheet
On the left side, the debit balances of the ledger account are recorded and on the right side, credit balances of the ledger account are recorded.
Account number is taken from a chart of accounts.
Some of the balances recorded on the debit side are assets, expenses etc.
Some of the balances recorded on the credit side are liabilities, equity, income etc.
Both the balances are added and their equity is checked. If they are not equal, there may be some error (mentioned above). Errors are rectified and checked again till the totals are equal.
The uses of unadjusted trial balance are as follows −
The advantages of unadjusted trial balance are as follows −
The disadvantages of unadjusted trial balance are as follows −