Page 121 - Book-keeping for Secondary Schools Student’s Book Form One

Trial balance

Provides a summary of balances used in balance. In this regard, the trial balance is
the preparation of financial statements used for checking the correctness of the
Debit and credit balances extracted from double entries made to the accounts.
general ledgers are listed on the trial
balance. Then, these balances are used Checks whether computations of the
as inputs in the preparation of financial ledger accounts balances were performed
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statements. In simple terms, balances are correctly
extracted from ledgers to a trial balance, Double entries might be done properly, but
then from a trial balance to financial mistakes can occur when computations
statements. One does not need to go back regarding the figures posted are done.
to each general ledger account to find Mistakes in the calculation will result
balances for the purpose of preparing into incorrect balances extracted from the
financial statements. ledger accounts. This will prevent the trial
balance from balancing. Therefore, the
Financial statements are financial trial balance checks whether computations
reports produced at the end of the of the figures on the trial balance were
accounting period. Examples of performed correctly.
financial statements are an income
statement and a statement of financial Helps the enterprise to keep its records
position. systematically
The trial balance is the summary of
debit and credit balances extracted from
Helps to detect errors that could have the general ledger. In the trial balance,
occurred in the posting process balances from the general ledger accounts
The trial balance is prepared using are listed systematically.
debit and credit balances extracted from
general ledger accounts. Since the entries Limitations of a trial balance
in the general ledger accounts are posted Even though a trial balance is important
following the double entry principle the to the entity, it also has its limitations.
trial balance should balance at any point The main limitation of the trial balance is
in time. Therefore, if the trial balance that it cannot detect all possible errors in
does not balance, it could mean that errors the ledger accounts. This means that the
have been made in the posting process. agreement of the totals of debit and credit
In view of this, the trial balance is used balance is not enough to conclude that
to detect errors made during the posting there was no error made when posting
process. the transactions to the general ledger
Checks the correctness of double entries accounts. This is because some errors
made to the accounts may still exist even though the totals of
If entries made to ledger accounts were the credit and debit balances agree. For
wrongly done, the trial balance will not example, a wrong amount is posted for a

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