Trial Balance

The list of debit and credit balances of all the ledger accounts extracted on a given date is known as trial balance. It is a statement rather than an account. It is only the statement of debit and credit balances of all the assets, liabilities, capital, incomes and expenses. It is the prepared on a separate sheet of paper in order to verify the arithmetical accuracy of books of account.

Some of the main definitions of the trial balance are given as below:

"Trail 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." - R. N. Carter

"The statement prepared with the help of ledger balances at the end of financial year (or at any other date) to find out whether debit total agrees with credit total is called trail balance." -R. Pickle

"Trail balance is a list of balances debit or credit standing in the books of a trade at any given date." - J. R. Batliboi

From the above definition, it is obvious that the trial balance is a statement of debit and credit balances of all the assets, liabilities, capital, incomes and expenses extracted from the ledger on a given date. It is prepared to examine the arithmetical accuracy of the books of accounts. It also facilitates for preparing the final accounts.

Objectives

The main objectives of preparing the trial balance are as follows:

1. To obtain summary information:
   The summary of all the ledger accounts is placed in one place in the trial balance. It presents the summary balances of all the assets, liabilities, capital, incomes and expenses of a particular date.
   
   
2. To help in making comparison and decision:
   The trial balance compares the balance of assets, liabilities and capital, and incomes and expenses of two different periods. It helps in the proper judgement of the business activities to make the important decisions.
   
   
3. To check arithmetical accuracy:
   The trial balance helps to check the arithmetic accuracy of the books of account. It checks whether the total of debit balances i.e expenses and losses equals the total of credit balances i.e incomes and gains or not. If the trial balances agree, the arithmetical accuracy is proved. If it does not agree, it includes the existence of errors in the books of accounts, which needs to be located and rectified.
   
   
4. To facilitate for preparing the final accounts:
   The trial balance serves as the basis for preparing the final accounts i.e trading account, profit and loss account and balance sheet. The balances of the trial balance which are incomes and expenses are placed on the trading and profit and loss accounts and the balances of assets, liabilities and capital are placed on the balance sheet.
   
   
5. To help for locating and rectifying errors:
   The trial balance helps in locating of the accounting errors at an early stage. Its disagreement is the signal for the existence of accounting errors in the books of accounts, which compels to locate and rectify them in near future.
   
   
6. To help in minimizing errors and frauds:
   The trial balance helps to minimize the different types of accounting errors and frauds. If the errors and frauds are committed, the trial balance disagrees. Hence, it gives moral pressure to the accountant to maintain books of accounts with great care and honesty.