Page 122 - Book-keeping for Secondary Schools Student’s Book Form One

Book-Keeping for Secondary Schools

transaction such that both debit and credit entries are posted using wrong amount, or
a posting is done to a wrong account. In such cases, the trial balance would still agree
while there are errors in the posting process.

Additionally, the trial balance does not:
(i) Prove that all transactions have been recorded,
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(ii) Find the missing entry from the journals or in the ledger,
(iii) Protect the repetition of postings,
(iv) Prove that the ledger is correct, and

(v) Detect off-setting errors.

In short, a trial balance does not guarantee that recording of entries will be error-free.

Activity 6.1

Mr Hatujuani is a businessman who does not appreciate the preparation of trial
balances. He believes that once the ledger balances are established, he can go straight
to the preparation of financial statements. Write a short report about importance of
a trial balance for his business.

Preparation of a trial balance
A trial balance is prepared from debit and credit balances extracted from the general
ledger accounts. When preparing the trial balance, two basic steps must be followed:

The first step involves identifying the debit and credit balances in the general ledger.
Performing this step depends on the data available. There are cases where a list of the
general ledger balances is given, and there are cases where one is given transactions
and has to process them (journalising, posting to the general ledger, balancing the
accounts and extracting the trial balance).

The second step is the actual listing of the balances in the trial balance. This is done by
listing the debit balances on the debit side of the trial balance and the credit balances
on the credit side of the trial balance.

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Student’s Book Form One

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