After the preparation of ledgers, the next step is the preparation ofa...
Explanation:
The correct answer is option 'b', which is the preparation of the trial balance. Let's understand why.
1. Overview:
After the preparation of ledgers, the next step in the accounting process is to prepare the trial balance. A trial balance is a statement that lists all the general ledger accounts along with their respective debit or credit balances.
2. Purpose of Trial Balance:
The trial balance serves as a tool to check the accuracy of the accounting records. It ensures that the total debits equal the total credits in the ledger accounts. The primary purpose of preparing a trial balance is to identify any errors or discrepancies in the recording or posting of transactions.
3. Process of Preparing Trial Balance:
The process of preparing a trial balance involves the following steps:
a. Collecting Ledger Balances:
All the ledger accounts are reviewed, and the closing balances of each account are collected. These balances are then recorded in the trial balance.
b. Classification of Balances:
The balances from the ledger accounts are classified into debit and credit balances. Assets, expenses, and losses have debit balances, while liabilities, equity, income, and gains have credit balances.
c. Listing Accounts:
The trial balance is prepared by listing all the accounts in a particular order. Typically, the accounts are arranged in the same sequence as they appear in the ledger.
d. Recording Balances:
The debit balances are recorded in the debit column of the trial balance, and the credit balances are recorded in the credit column. The amounts are usually written in the respective columns on the same line as the account name.
e. Calculation of Totals:
The total of the debit column is calculated, and the total of the credit column is also calculated. These totals should be equal if the books are in balance.
4. Verification of Accuracy:
Once the trial balance is prepared, the totals of the debit and credit columns are compared. If they are equal, it indicates that the ledger accounts have been accurately recorded and posted. However, if the totals do not match, there may be errors in the books of accounts that need to be identified and rectified.
5. Conclusion:
In conclusion, the preparation of the trial balance is the next step after the preparation of ledgers. It plays a crucial role in ensuring the accuracy of the accounting records and acts as a basis for preparing financial statements such as the profit and loss account and the balance sheet.