Meaning – When posting of all the transactions into the Ledger is completed and accounts are balanced off, then the balance of each account is put on a list called Trial Balance.
Definition – Trial Balance is the list of debit and credit balances taken out from ledger. “It also includes the balances of Cash and bank taken from the Cash Book”.
Preparation – Steps (Only Balance Method)
Ledger A/cs which shows a debit balance is put on the Debit side of the trial balance.
The A/c Showing credit balance is put on the Credit side of Trial Balance.
Accounts which shows no balance i.e. whose Debit and Credit totals are equal are not entered in Trial Balance.
Then the two sides of the Trial Balance are totalled. If they are equal it is assumed that these is atteast no arithmetical error in the posting and balancing of Ledger A/cs.
Objectives or Functions of Trial Balance :
It helps in ascertaining the arithmetic accuracy of ledger accounts.
Helps in locating errors.
Provides the summary of Ledger A/cs.
Helps in the prepartion of Final A/cs.
Posting of opening Entries :
First of all opening Journal Entry is done in the Journal proper.
All Assets A/cs are Debited and Liabilities A/cs are Credited. Difference between the totals of the two sides is the Capital.
Important :
Besides opening Journal entries, any transaction which is not covered under any of the Subsidiary Book is done in Journal proper.
Suspense Account :
When Trial Balance does not agree, then first of all we try to locate the errors. Sometimes, in inspite of the best efforts, all the errors are not located and the Trial Balance does not tally. Then in order to avoid delay in the preparation of final accounts, a new account is opened which is known “Suspense Account”
Difference in Trial Balance is posted to this Account :
If there is Excess Debit
Difference is posted in the Trial Balance to the Credit side of Suspense A/c
If there is Excess Credit
Difference is posted in the Trial Balance to the Debit side of Suspense Account.
Closing of Suspense A/c :
The errors which led to the difference still remains to have to be located. These errors will be rectified through Suspense A/c (One sided errors) which will be explained in the topic Rectification of Errors.
When all the errors are rectified, this Account closes down automatically. If the difference in Trial Balance persist, it is shown in the Balance Sheet.
Debit Balance of Suspense A/c is shown in the Asset Side of the B/Sheet.
Credit Balance of Suspense A/c is shown in the Liability Side of the Balance Sheet.
CBSE Accountancy Class XI ( By Mr. Kailash Gururani )
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