For the purpose of checking
the arithmetical accuracy of the accounting, a Trial Balance is
prepare at a certain date, usually the last day of the trading period (month,
half-year or one year).
When the debit total > the credit total, the account is said to have a
debit balance;
When the credit total > the debit total the account is said to
have a credit balance.
Only the debit or credit balance of the account will be listed in
the Trial balance.
Preparation
of a Trial Balance
The following are the steps taken in preparing a Trial Balance:
1.
Determine the balance of each
account in the ledger and Cash Book.
2.
List the account titles and
their balances.
3.
Total the debit and credit
balances.
4.
Prove their equality.
Extra notes https://www.youtube.com/watch?v=SpAwI_SSDHY
Homework: Copy this in an A4 paper. To check for the answers highlight the text.
1. What is a trial balance and why is it prepared?
Trial Balance is a statement of ledger balances at a particular point of time. At all points of time sum of all debit balances must be equal to sum of all credit balances.
It is prepared to
a)To check the arithmetic accuracy of ledger balances
b)To finalize the accounts easily
c)To ensure that the Statement of Financial Position will tally
2. When do businesses prepare a trial balance?
A trial balance can be prepared at any time however it is mostly prepared at the end of an accounting period.
3. If an account has a debit balance, where will you place it in the trial balance?
All debit balances are placed in debit column of the trial balance.
4. If an account has a credit balance, where will you place it in the trial balance?
All credit balances are placed in credit column of the trial balance.
5. What does an agreed trial balance tells us?
An agreed trial balance tells us that the books of accounts are arithmetically correct. But it does not mean that every transaction in journal and ledger has been correctly recorded and there is no error in the books. A trial balance may agree and still there may be one or more errors in books of accounts. For example, a trail balance will not detect the omission of a transaction because the omitted transactions don't affect the agreement of trial balance.
6. What does a disagreed trial balance tells us?
A disagreed trial balance indicates the presence of one or more errors in the books of accounts. It may also be the result of incorrect total of debit or credit column or both.
7. Which accounts don't need to be transferred to the trail balance?
The accounts with zero balance don't affect trial balance and are therefore not needed to be transferred to trial balance.
8. What are the two methods of preparing trial balance?
The two methods of preparing trial balance are balance method and total method. Balance method is more popular whereas total method is less popular.
a)To check the arithmetic accuracy of ledger balances
b)To finalize the accounts easily
c)To ensure that the Statement of Financial Position will tally
2. When do businesses prepare a trial balance?
A trial balance can be prepared at any time however it is mostly prepared at the end of an accounting period.
3. If an account has a debit balance, where will you place it in the trial balance?
All debit balances are placed in debit column of the trial balance.
4. If an account has a credit balance, where will you place it in the trial balance?
All credit balances are placed in credit column of the trial balance.
5. What does an agreed trial balance tells us?
An agreed trial balance tells us that the books of accounts are arithmetically correct. But it does not mean that every transaction in journal and ledger has been correctly recorded and there is no error in the books. A trial balance may agree and still there may be one or more errors in books of accounts. For example, a trail balance will not detect the omission of a transaction because the omitted transactions don't affect the agreement of trial balance.
6. What does a disagreed trial balance tells us?
A disagreed trial balance indicates the presence of one or more errors in the books of accounts. It may also be the result of incorrect total of debit or credit column or both.
7. Which accounts don't need to be transferred to the trail balance?
The accounts with zero balance don't affect trial balance and are therefore not needed to be transferred to trial balance.
8. What are the two methods of preparing trial balance?
The two methods of preparing trial balance are balance method and total method. Balance method is more popular whereas total method is less popular.
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