Trial Balance

According  to  the  dual  aspect  concept,  the  total  of  debit  balance  must  be  equal  to  the  credit balance. It is necessary that the correctness of posting to the ledger accounts and their balances be verified. This is done by preparing a trial balance.

Trial balance is a statement prepared with the balances or total of debits and credits of all the accounts  in  the  ledger  to  test  the  arithmetical  accuracy  of  the  ledger  accounts.  As  the  name indicates, it is prepared to check the ledger balances. If the total of the debit and credit amount columns of the trial balance are equal, it is assumed that the posting to the ledger in terms of debit  and  credit  amounts  is  accurate.  The  agreement  of  a  trial  balance  ensure  arithmetical accuracy  only,  A  concern  can  prepare  trial  balance  at  any  time,  but  its  preparation  as  on  the closing date of an accounting year is compulsory.

•       Structure of a Trial Balance

The format of trial balance is simple as shown below:

A Trial Balance contains mainly five columns as seen in the above format. In the second column the name of the account head is written. In the fourth and the fifth columns the total of the debit and the credit side of the account concerned or the debit and the credit balance, if any, is entered and totaled respectively.  
Features of a Trial Balance
1. It contains a list of all ledger account including cash account.2. It is not a part of the double-entry system of bookkeeping; it is just a working paper.3. It can be prepared any time during the accounting period.4. It serves as an instrument for carrying out the job checking and testing.5. Arithmetical accuracy of posting of the entries from journal to ledger can be ensured.6. Some errors are not revealed by the Trial Balance, for example, errors of principle, errorof omission etc.7. Total of the debit and credit amount columns of the trial balance must tally. But, tallyingof trial balance is not a conclusive evidence of accuracy of accounts.8. Difference in the debit and credit columns points out that some mistakes have beencommitted. Objectives in Drawing up a Trial Balance
1. It ensures that all transactions have been recorded with identical debit and credit amountsand the balance of each account has been computed correctly.2. It facilitates the preparation of the Statement of Profit or Loss and the Statement ofFinancial Positon by making available the balances of all the accounts at one place.3. It also ensures that the balance of each account, whether debit or credit, has beentransferred properly to the respective columns of the trial balance and that the TrialBalance has been correctly added.4. Some of the errors in the books of account can be detected by the Trial Balance and theycan be rectified before the preparation of the final accounts.
Limitationsof a Trial Balance
It should be noted that the agreement of Trial Balance is not a conclusive proof of accuracy. Inother words, in spite of the agreement of the trial balance some errors may remain. These may beof the following types:1. Transaction has not been entered at all in the journal or it has been entered twice.2. A wrong amount has been written in both columns of the journal.3. A wrong account has been mentioned in the journal.4. An entry has not at all been posted in the ledger.5. Entry is posted twice in the ledger.
Still the preparation of trial balance is very useful; without it, the preparation of financialstatement i.e the Statement of Profit or Loss and the Statement of Financial Positon would bedifficult.