trial balance

Accountancy
Key concepts
Accountant Bookkeeping Trial balance General ledger Debits and credits Cost of goods sold Double-entry system Standard practices Cash and accrual basis GAAP / IFRS
Financial statements
Balance sheet Income statement Cash flow statement Ownership equity Retained earnings
Auditing
Financial audit GAAS Internal audit Sarbanes-Oxley Act Big Four auditors
Fields of accounting
Cost • Financial • Forensic Fund • Management • Tax
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In accounting, the trial balance is a worksheet listing the balance at a certain date, of each ledger account in two columns, namely debit and credit. Under the double-entry system, in any transaction the total of any debits must equal the total of any credits, so in a Trial Balance the total of the debit side should always be equal to the total of the credit side. The trial balance thus serves as a tool to detect errors, which can result in the totals not being equal. Often credits will be represented as a negative, in which case the total of the trial balance should be 0.

A balanced trial balance does not guarantee that there is no error. The following are the main classes of error that are not detected by the trial balance:

• An error of original entry is when both sides of a transaction include the wrong amount.^[1] For example, if a purchase invoice for £21 is entered as £12, this will result in an incorrect debit entry (to purchases), and an incorrect credit entry (to the relevant creditor account), both for £9 less, so the total of both columns will be £9 less, and will thus balance.
• An error of omission is when a transaction is completely omitted from the accounting records.^[1] As the debits and credits for the transaction would balance, omitting it would still leave the totals balanced.
• An error of reversal is when entries are made to the correct amount, but with debits instead of credits, and vice versa.^[1] For example, if a cash sale for £100 is debited to the Sales account, and credited to the Cash account. Such an error will not affect the totals.
• An error of commission is when the entries are made at the correct amount, and the appropriate side (debit or credit), but one or more entries are made to the wrong account of the correct type.^[1] For example, if fuel costs are incorrectly debited to the postage account (both expense accounts). This will not affect the totals.
• An error of principle is when the entries are made to the correct amount, and the appropriate side (debit or credit), as with an error of commission, but the wrong type of account is used.^[1] For example, if fuel costs (an expense account), are debited to stock (an asset account). This will not affect the totals.
• Compensating errors are multiple unrelated errors that would individually lead to an imbalance, but together cancel each other out.^[1]
• A Transposition Error is a Computing error caused by switching the position of two adjacent digits. Since the resulting error is always divisible by 9, accountants use this fact to locate the misentered number. For example, a total is off by 72, dividing it by 9 gives 8 which indicates that one of the switched digit is either more, or less, by 8 than the other digit. Hence the error was caused by switching the digits 8 and 0 or 1 and 9. This will also not affect the totals.

The Trial Balance particulars are Trial that is not a real.Based on that only Accounting peoples build Balance Sheet.This only like a blue print of Balance sheet.

A trial balance is a statement of Ledger.

References