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Special Features of Trial Balance
These are the following unique features of trial balance:
- On specific date the trial balance is prepared, that is the reason we write ‘as’ on the heading.
- Trail balance keeps a record of all the ledger accounts that includes cash account.
- Trial balance is made with the balances and totals or the balances and totals of the ledger accounts.
- Amount of debit and credit of account must be equal.
- If debit and credit of trial balance are equal to it is known as the ‘double entry system,’ and assumptions of accounting are observed.
- Difference between debit and credit in trial balance implies the error in it.
- Thus an errorless accounting indicates that there is no mistake in debit and credit side.
Purpose and functions of trial balance:
Purpose of making a trial balance is the following:
- Test of arithmetical accuracy:
Accuracy of the arithmetical calculations actually is best test for trial balance. If all collected data are put incorrect pattern then, debit and credit of trial balance must have to be equal.
- Summarized information on ledger accounts:
Trial balance actually can keep a track on all the ledger accounts. It contains all names and debit or credit details of all ledger account. Thus trial balance made it easy to look at the ledger accounts and therefore making the whole process easy.
- Basis for preparing final accounts:
Conclusion that we come on to at the end of a trial balance is to know the profit amount and also the value of different assets and liabilities. This also helps in making final accounts. Thus lays significance of preparing a profit and loss account and a balance sheet by information supplied by trial balance.
- Helpful for making adjustments:
When in the process of making final accounts, certain changes must be done like closing stock, outstanding and prepaid expenses, accrued and unearned income, etc.are done. So trial balance helps to adjust all these information.
Links of Previous Main Topic:-
- Book keeping
- Meaning of gaap
- Origin of transaction
- The concept of debit and credit
- Subsidiary books or sub division of journal
- Balancing of ledger accounts
- Meaning of trial balance
Links of Next Accounting Topics:-
- Limitations of trial balance
- Methods of preparing trial balance
- List of important accounts and balances
- Balance sheet in final accounts without adjustments
- Adjustments additional information in preparation of final accounts
- Meaning of bank reconciliation statements
- Bills of exchange concept of bills of exchange
- Errors affecting or disclosed by trial balance introducing the concept
- Meaning of depreciation
