Account 6 Marks Question

''A Trial Balance is a statement, prepared with the debit and credit balances of the Ledger Accounts to test the arithmetical accuracy of the books.'' -J.R. Batliboi ''A Trial Balance is the list of debit and credit balances, taken out from the Ledger. It also includes the balances of cash and bank taken from the Cash Book.'' -CarterObjectives or Functions of Trial Balance:

1. To Ascertain the Arithmetical Correctness of Ledger Accounts: The Trial Balance enables one to establish whether posting and other accounting processes have been carried out without committing arithmetical errors.
2. To Help Prepare the Final Accounts: Financial Statements are prepared from the Trial Balance. Preparation of Financial Statements, therefore, is the second objective of preparing a Trial Balance.
3. Summary of Each Account: The Trial Balance is a summary of each Ledger Account. The ledger account may have to be referred only when more detail is required in respect of an account.
4. To Help in Locating Errors: The Trial Balance helps in locating errors in maintaining Book of Account. It should, however, be kept in mind that it does not disclose, i.e., show all the errors in Book Keeping except the arithmetical inaccuracies.

''A Trial Balance is a statement, prepared with the debit and credit balances of the Ledger Accounts to test the arithmetical accuracy of the books.'' -J.R. Batliboi ''A Trial Balance is the list of debit and credit balances, taken out from the Ledger. It also includes the balances of cash and bank taken from the Cash Book.'' -CarterObjectives or Functions of Trial Balance:

1. To Ascertain the Arithmetical Correctness of Ledger Accounts: The Trial Balance enables one to establish whether posting and other accounting processes have been carried out without committing arithmetical errors.
2. To Help Prepare the Final Accounts: Financial Statements are prepared from the Trial Balance. Preparation of Financial Statements, therefore, is the second objective of preparing a Trial Balance.
3. Summary of Each Account: The Trial Balance is a summary of each Ledger Account. The ledger account may have to be referred only when more detail is required in respect of an account.
4. To Help in Locating Errors: The Trial Balance helps in locating errors in maintaining Book of Account. It should, however, be kept in mind that it does not disclose, i.e., show all the errors in Book Keeping except the arithmetical inaccuracies.

Two methods of preparation of Trial Balance:

1. Totals Method.
2. Balances Method.

We can prepare the Trial Balance in the following three ways:

1. Totals Method:

In this totals method, we ascertain the total of each side in the ledger i.e. debit and credit, separately and show them in the respective columns in the Trial Balance. Here also the total of the column with debit totals should tally with the total of the column of the credit totals. The dual aspect concept holds true in this case also.

However, totals method is not in use widely as it does not determines the accurate balances of the accounts and thus, also does not help in the preparation of the Financial statements or final accounts.

2. Balances Method:

In this method, we total the debit side and the credit side of the accounts and balance them. We then write these debit or credit balances of the ledger accounts in the respective debit and credit columns in the Trial Balance. A trial balance tallies when the total of the debit column is equal to the total of the credit column.

This method is the most common method as it shows the net effect and also helps in the preparation of the financial statements. Usually, in the trial balance instead of showing the individual accounts of the debtors and creditors, we show Sundry Debtors and Sundry Creditors accounts, respectively.

3. Totals-cum-Balances Method:

In this method, we prepare four columns. In two columns we write debit and credit totals of accounts and in the other two columns, we write the debit and credit balances of accounts. This method consumes a lot of time and is a duplicate of work. Hence, it is rarely in use.

Objectives or Functions of Trial Balance:

1. To Ascertain the Arithmetical Correctness of Ledger Accounts: The Trial Balance enables one to establish whether posting and other accounting processes have been carried out without committing arithmetical errors.
2. To Help Prepare the Final Accounts: Financial Statements are prepared from the Trial Balance. Preparation of Financial Statements, therefore, is the second objective of preparing a Trial Balance.
3. Summary of Each Account: The Trial Balance is a summary of each Ledger Account. The ledger account may have to be referred only when more detail is required in respect of an account.
4. To Help in Locating Errors: The Trial Balance helps in locating errors in maintaining Book of Account. It should, however, be kept in mind that it does not disclose, i.e., show all the errors in Book Keeping except the arithmetical inaccuracies.

Solution is as follows.