After the posting of the entries is done into ledger, the total and balancing of individual accounts are done on a particular date. Every account shows the debit balance or credit balance or nil balance. These balances of accounts are put on a list and that list is called as trial balance. It means all the closing balance of all the accounts including cash balance from cash book and bank balance from bank book are shown in trial balance. The accounts having nil balance need not to be shown in trial balance. The trial balance contains the following columns:-
- Head of the accounts:- in which the name of the accounts are shown.
- Debit amount:- in which all the debit balance of accounts are shown
- Credit amount:- in which all the credit balances are shown
After taking all the balances from ledger and, cash book and bank book, the totals of the debit and credit column of trial balance are done. The total of both sides must be equal. If there is a difference in totals of debit and credit columns of trial balance then it shows that there are some mistakes in accounts.
Basically, the trial balance shows the arithmetical accuracy of the accounts because it deals with figure work of accounts only. There are so many errors which arise and can not be traced out with help of trial balance though the totals both sides of trial balance agree. For example:- errors of principles, errors of omissions, compensatory errors, omission of entry in day book, posting of the entries in correct side but in wrong accounts etc.
But it does not mean that the trial balance has no value in accounting system. The major problem in accounts is the arithmetical accuracy. Once the totals of both side of trial balance agree then most of the problem is solved. In respect of above errors, there are so many cross checks which help the accountant to find out the 100 percent correct position of accounts. For example:- Bank balance can be tallied with the bank statements, cash balance can be tallied with physical cash available with cashier, the customer’s and supplier’s balance can be compared with their statement of accounts, physical verification can be done on fixed assets and inventories. After doing the audit and scrutiny of accounts by an experienced accountant, the other errors also can be traced out very easily.
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