Features of a Trial Balance

Trial Balance is a statement showing all the ledger account balances whether debit or credit on a particular date. A firm prepares the trial balance to check the arithmetical accuracy of the accounts. The total of the debit column and the credit column of the Trial Balance must be equal. A firm usually prepares a trial balance at the end of the accounting year. A trial balance is a summary of all the ledger accounts. Let us now discuss the Features of a Trial Balance in detail.

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• Objectives and Limitations of Trial Balance
• Preparation of Trial Balance

Features of a Trial Balance

The following are the features of a Trial Balance:

1. It is a list of the various ledger account balances whether debit or credit.
2. It is prepared in the form of a statement.
3. A firm prepares a trial balance in order to check the arithmetical accuracy of the ledger accounts.
4. The arithmetical accuracy established by a trial balance is not proof that there are no mistakes in the books of accounts.
5. A trial balance is usually prepared at the end of the accounting year. However, a firm may prepare it weekly, monthly, quarterly or half-yearly also.
6. It does not form a part of the final accounts.
7. It provides a summary of the ledger accounts. Thus, it serves as a link between the books of accounts and Trading & Profit and Loss A/c and Balance Sheet.

Preparation of the Trial Balance

1. A firm may prepare it on a sheet of loose paper also.
2. We first need to balance the ledger accounts. After balancing, an account may have a debit or credit or zero balance.
3. The debit balances are written on the debit side and the credit balances are written on the credit side of the trial balance.
4. The sum of both the columns of the trial balance shall be equal in order to tally the trial balance. Thus, a trial balance has to tally because of the rule that every debit has an equal and corresponding credit.
5. It may be prepared either in the Journal form or in the Ledger form.

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Purpose of a Trial Balance

1. To check the arithmetical accuracy of the transactions and the ledger accounts.
2. To determine the ledger account balances.
3. It serves as evidence that the double entry system has complied duly.
4. It facilitates the preparation of the financial statements.

Solved Example on Features of a Trial Balance

Explain the methods of preparing a Trial Balance?

Ans.

The methods of preparing a trial balance are as follows:

1. The total method or Gross trial balance: Under this method, we total both the sides of the ledger accounts. We enter the ‘debit totals’ on the debit side of the trial balance and the ‘credit totals’ on the credit side of the trial balance.
2. Balance method or Net trial balance: Under this method, we first need to balance the individual ledger accounts. After this, we write the debit balances on the debit side and credit balances of accounts on the credit side of the trial balance.
3. Compound method: Under this method, we write the totals as well as balances in the separate columns of the trial balance. Thus, this method is a combination of the Total method and Balance method both.