trial balance in accounting
Considering the complexity of modern business, the utility of accounting has become immense. After calculating the sum and balance of the debit (debit) and credit (credit) side of the accounts prepared based on the entry system, a trial balance is prepared on a certain date to check their arithmetical correctness. The examination list is the third step in the accounting cycle, in which the balances of all the accounts are checked by preparing a summary of the accounts. This is a statement or list only and based on this business and a profit and loss account and balance sheet (status statement) are prepared.
In simple words, an examination list or trial balance ledger
A list prepared on a given date from the sum or balance of all the accounts and cash book, whose purpose is to check the mathematical correctness of the books of account.
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TRIAL BALANCE example
NAME OF ACCOUNT L.F DR. CR.
Capital 2,50,000
Sales 4,00,000
cash in hand 12,000
cash in the bank. 24,000
Purchase 3,00,000
Machinery 2,00,000
Withdrawal 12,000
Debtors 96,000
Furniture 6,000
purchase return 5,000
sales return 6,000
inventory 80,000
discount 2,400
Car 8,900
creditors 10,800
rent 9,000
Wages 4,000
sundry Exp 8,000
commission received. 2,600
(discount) received 2,700
768300 768300
Objectives of trial balance
The exam list is mainly prepared for the fulfillment of the following purposes1. Checking the Arithmetic Correctness of the Books of Accounts
2. To examine the principle of the double entry system.
3. To provide ease in preparation of trading and profit and loss account and balance sheet (status statement).
Features of trial balance
1. The exam list is not an account, it is a list or description only.2. This ledger is prepared with the help of accounts and cash books.
3. It is prepared on a fixed date.
4. It is constructed to check the arithmetical correctness of the accounts.
5. It provides the basis for the preparation of final accounts or financial statements.
To close 6 letters.
7 To make a comparative study.
Is the receipt of the examination list an infallible measure of the correctness of the books of account?
Under the double entry system, each transaction is mentioned on the opposite sides of the two accounts, and with the help of these accounts, the examination list is prepared. If the sum of the amount on the debit and credit side of the examination list is equal, it is assumed that there is no arithmetic error in the work of Khatauni, but the meeting of both sides in the examination list is not an infallible measure that the account is completely pure. This can be further clarified as follows
(a) Errors not detectable from the trial balance
1. Inaccuracy of error If any transaction is left out in the general or other preliminary books of account, then this error will not have any effect on the reconciliation of the examination list, such as a cash sale of ₹ 500 is not mentioned in the initial books of account itself. The sum of both sides of the test list will be less than ₹ 500 but there will be equality in the sum of both sides.2. Errors in the initial account If the entry is made with the wrong amount in the initial books of the account itself, then this error does not have any effect on the reconciliation of the examination list, for example, while making the general entry, instead of the amount of ₹ 15,000, only ₹ 1500 should be written.
3. Errors in posting If any amount is written on the right side but in the wrong account while doing the general posting, then this error will not be known by matching the examination list, e.g., while doing the posting, Mahesh's account is written in the debit side of the account. The amount due should be written on the debit side of ' Account of Rohan'.
4. Errors to be missed in posting If the accounts of equal amounts are not entered while doing the General's posting, then it will not affect the reconciliation of the examination list.
5. Compensatory errors Sometimes some errors are such that their effect is eliminated by other errors, they are called compensatory errors. With these errors, the sum of the examination list does not get uneven from the examination, such as in the debit side of the 'sohan account'. ₹75 was written short, the same ₹75 was written short on the credit side of Mohan Ka account 95 less written.,
(b) Inaccuracies to be detected from the trial balance
Common following inaccuracies affect the sum of the test list(1) Error in adding up or carrying forward the sum of cash book or other subsidiary books.
(2) Error related to non-entry in any one account while making an entry in the ledger account from general and other primary books of account.
(3) An entry made on the wrong side of one of the accounts or with the wrong amount while doing the accounting in the books of accounts from the general and other preliminary books of account.
(4) An error in the sum of the accounts of any ledger, in carrying the sum or in drawing out the balance or excess.
(5) If the amount of any account is not written in the test list, written incorrectly, or written on the wrong side.
(6) An error occurred in the summation of the examination list.
Based on the proper discussion, it can be said that the sum of the examination list is affected by the error affecting one side of the debit or credit, but the information about the errors affecting both sides is not known from it. Therefore, it can be said that "Examination list is a measure of mathematical correctness of books of account, but it is not an infallible measure of the fact that the accounts are completely true."
The following measures should be taken
1. Re-checking the totals First of all, the sum columns of both sides of the test list should be resumed.2. Amount of difference If the sum of both sides of the examination list is correct, then by finding the amount of difference in the sum of the sums of both sides, it should be seen whether any account is exempted from writing this difference in the examination list. has gone.
3. Half of the difference After this, it should be seen that no account of this amount has been written in the wrong amount column of the test list.
4. Part of the amount of the difference Thereafter the amount of the difference should be divided by No. If the total part of 9 is gone in the amount of the difference, then it should be considered that the numbers in the amount side of an account have been converted or zero work or more has been applied
For example, ₹ 86 in place of ₹ 59, ₹ 654 in place of ₹ 456, ₹ 10 in place of ₹ 1000.
5. Checking of ledger and subsidiary books, even after suitable measures, the sum of both sides of the examination list is not equal, then it should be seen by checking the totals of ledger accounts and subsidiary books that the balance (excess) or total Whether the amount is shown in the examination list or not
6. Reconciliation with General After this it should be checked whether the amount in the journal key has been correctly written in the account of the ledger.
7. Balance (excess) of the previous year Whether the balance (excess) of the previous year is shown in the books of account of the current year or not.
golden rules for trial balance
ASSETS DR.
ASSETS DR.
goodwill
land
building
furniture
machine
debtors
prepaid exp
accrued income
bills receivable
closing stock
plant
cash in hand
cash at bank
LIABILITIES CR.
capital
bank overdraft
creditors
bills payable
outstanding exp
unaccrued income
bad debts provision
exp
wages
salary
interest
postage
bad debts
rent
advertisement.
Commission
tax and rate
cartage
charity
drawings
insurance
depreciation on assets
trade exp
audit fees
other exp or loss
income
interest received
rent received
commission received
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