Meaning of Trial Balance in Accounting
Preparing a Trial balance is the next step to posting and balancing ledger accounts. It is a statement of debit and credit balances that are extracted from ledger accounts on a specific date.
It is made as an attempt to prove that the total of accounts with a debit balance is equal to the total of accounts with the credit balance. As the name suggests, it is an actual “trial” of the debit and credit balances being equal.
A journal and a ledger are maintained according to the double-entry concept of accounting, the balances in trial balance must tally.
|S.No.||Heads of Accounts||LF.||Debit||Credit|
|3||Land & Building A/C||xxxx|
|6||Loan from ABC Bank A/C||xxxx|
Related Topic – What is an Adjusted Trial Balance?
Reasons to Prepare a Trial Balance
- It acts as a base to create the final accounts of a business such as an Income statement, a Trading A/C, and a Balance Sheet.
- To prepare a trial balance it is important to ensure the arithmetic conceptual accuracy. Due to the dual aspect of accounting, the sum of total credits should be equal to the sum of total debits.
- It acts as a summarized form of all ledger balances, in case the debit and credit balances of a trial balance don’t match it, it is concluded that there is some error and the difference is temporarily transferred to a “Suspense A/C” and corrected afterwards.
For Accounting Practice