Trial Balance

Every transactions which takes place in the business, is recorded either in the Journal or in the subsidiary books. It is posted in the concerned accounts. After posting is over, final accounts are prepared in order to know the operational results of the business during a particular or fixed period and also to depict financial position of the business on a particular day.  Final accounts could be prepared only, if information relating to balances of all accounts is available. This function of supplying necessary and accurate balances is performed by Trial Balance. So it is very much important to know the meaning of trial balance.

Meaning of Trial Balance :

Trial balance is a statement which shows balances of all accounts on a particular date. In other words, trial balance is a schedule or list of balances whether debit or credit, extracted from the accounts in the ledger including cash and bank balances from the cash book.

Trial balance contains three columns such as particulars, Amount (Dr.) and Amount (Cr.)

Method of preparing trial balance:

Generally speaking there is one method of preparing trial balance i.e. by the balance method. However as per accountants, the following are the methods of preparing trial balance:

• By Balance Method
• By Total Method
• By Combined Method i.e. Balance and Total Method

Balance Method: Under this method as the name of the method suggest that balance of each account is taken. This method is very simple, easy to calculate, saves both time and labor

Total Method: Under this method, instead of taking balance of each account, the total of both the sides of each account is taken.

Combined Method: Under this method, as it is clear from the method, contains both the above explained methods i.e. balance as well as total method. This method is not in use because of wastage of time and labor.

Questionnaire:

• What is trial balance?
• What are the methods of preparing trial balance?