Iii) what is the objective of preparing trial balance?
Answers
Answer:
Objectives of Preparing Trial Balance
1] Ascertainment of the Arithmetical Accuracy
We record the entire debit as well as the credit balances of the ledger accounts in a Trial Balance. In other words, it is the summary of all the ledger accounts. The total of debit side shall be equal to the credit side, for the trial balance to get tallied. When it tallies, we assume that the posting and the balancing of the ledger accounts are accurate. Thus, it ensures the arithmetical accuracy of the ledgers. However, this is not the conclusive evidence of the correctness and the accuracy of the ledger accounts.
2] Locating the Errors
It helps in locating the errors in the posting or recording of the transactions. When a Trial Balance does not tally, then we know that the errors must have occurred at the time of
i.totaling the Subsidiary books
ii.posting in the ledgers
iii.balancing the accounts
iv.writing the account balances in the trial balance
v.totaling the trial balance. After finding the errors we need to rectify them.
3] Preparation of Financial Statements
The Trial Balance is a summary of all the ledger account balances. Thus, while preparing the final accounts, we do not need to refer the individual accounts. We can take the final balances of the accounts directly from the Trial Balance. We directly transfer the final balances to the Trading and Profit and Loss A/c and Balance Sheet. Let us now look at the trial balance format.
Explanation:
Answer:
The Trial Balance is created at the end of the year and is used to create financial statements such as the profit and loss account and the balance sheet. The fundamental goal of a trial balance is to guarantee that the business transactions recorded in a company's ledgers are mathematically correct.
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