Trial Balance - Principles of Accounting, Accountancy and Financial management Video Lecture | Accountancy and Financial Management - B Com

trial balance now we have come to the
third phase of accounting from the
source document we made the books of
original entry first entry is made in
the journal we went on to post it to the
ledger and now we come to the trial
balance which is your stage of
summarization let us see how our trial
balance is prepared happen discussion on
trial balance we will first understand
what is a trial balance basically it is
a statement of ledger account balances
you want to find out well it is prepared
what are its advantages how it is
prepared actually there are three
methods so one of them is actually
popular very popular the balance method
what is the suspense account sometimes
we have a suspense account in a trial
balance
what is the suspense or not and what is
what are the limitations of our trial
balance so let us quickly understand
what is a trial balance a trial balance
is first and foremost a statement like
we mentioned before this is the release
is the third phase of accounting process
after journal followed by nature and now
we have come to the trial balance if we
remember our original definition of
accounting one of the oldest definitions
was that accounting is the art of
recording which we recorded in the
ledger observe in the journal we
recorded in the journal classifying
which we did in the ledger and now we
are going to the third phase that is
summarizing this trial balance third
phase of the accounting process a trial
balance first and foremost is
statement it is not not not an account
it is not an account it is a statement
containing all ledger account balances
it contains all ledger account balances
to remember when we posted to a major
major had a debit balance when the debit
side was born it had a credit balance
when the credit side was more so account
balances may be debit or maybe credit
sometimes they don't use balances
sometimes there is a method by which
they use the entire totals then type
total it was there in the ledger account
so it is a statement first and foremost
trial balance is a statement containing
all nature account balances as on a
particular date remember that a trial
balance is relevant on a particular date
the cash balance today if it is 50,000
tomorrow with one transaction of cash
the balance can change so our trial
balance is always prepared as on a
particular date when we write a heading
for a trial balance we say trial balance
as on 31st March our trial balance as on
31st December etc since the ledger
account since the jaalin is first
prepared
following the rules of double-entry the
dual aspect where we had an accounting
equation which was satisfied where we
had a left side in the right side a
debit side and a credit side and debit
was always equal to credit a transaction
when we record in a journal it is
recorded in such a manner that the
debits equal the credits if we correctly
post what we have recorded in the
journal to the ledger the sum total of
the ledger account balances will also
have equal debit and credit so
ultimately a trial balance if we add up
the balances the debit balances in C
total we total the credit balances off
the ledger accounts debit total will be
equal to the credit book should be equal
to the credit sometimes it does not
value but that is because of some error
that has been committed at the time of
posting at the time of recording at the
time of the release we will discuss the
errors which can come later on therefore
in a way we can say that the trial
balance checks the arithmetic 'el
accuracy arithmetical accuracy of D
books of account because the debit
should be equal to the credit if we
prepare a trial balance and the total of
the debit side is not equal to the total
of the credit side or the total of the
debit balances is not equal to the total
of the credit balances then we know our
automatically there is some mistake that
we have week why do we emphasize the
arithmetic electracy but it is possible
that there are some errors which are not
reflected even through our trial balance
suppose we forget completely omit to
record an entry the trial balance will
still standing but it would not be
accurate because one transaction is
missing now when is a trial balance
prepared it can be prepared any time may
be prepared monthly it may be prepared
quarterly may be prepared half yearly or
it may be prepared only annually but it
is definitely prepared at the end of
each account in here because final
accounts the fourth stage the
preparation of the final accounts what
are the final accounts going to say a
balance sheet and the income statement a
statement a balance sheet a statement of
assets and liabilities and the profit
and loss account of the income statement
which tells us the profit or loss for
the year the result of the
society that we have done we are in
danger so final accounts are prepared
from the trial balance so the trial
balance why this can be prepared monthly
or quarterly or whatever annually it has
to be prepared because we prepare final
items from the trial balance so please
remember trial balance is a statement it
is not an account it's a statement
containing all alleged account balances
as on a particular date the debit and
the credit side or the debit total and
the credit total in a trial balance
should be equal if not we know that
arithmetic le some mistake has been made
the trial balance can be prepared at any
time it definitely has to be prepared at
the end of the year so what are the
objectives of a trial balance why is a
trial balance prepared the trial balance
is prepared one to confirm the
arithmetical accuracy of the books like
we discussed
if the debit side is not equal if the
debit total is not equal to the credit
total that is some mistake that has
happened while posting while totally
totally is called casting so while
posting or while casting while entering
some errors have been made the other
advantage of a trial balance is that we
get the summary of all account balances
we know the total purchases for the year
you'll know the total sales for the year
the rent expenses of the for the year
the amount that we have to pay to XYZ
the amount that is receivable from ABC
etc so it's a summary of all balances in
one place body glance we get to see all
the balances if we need further details
only then we need to go to the go back
to the ledger
and check for the details but trial
balance provides a total a summary in
one glance in one place of all the
balances all the account balances
whether they are personal real or
nominal whether they are accounts of
assets whether they are accounts of
liabilities of incomes or of expenses
and thirdly the it is from the trial
balance trial balance is the basis with
which the final accounts are prepared
final accounts being balance sheet and
the profit and loss account or the
income statement this is a statement of
assets and liabilities this is the
income statement income minus expenses
will give us the net profit so the trial
balance ensures more or less some kind
of accuracy reassures us that there is
some kind of accuracy in the books when
both sides study when it does not tell
you we look for the errors and try and
locate till the trial models exist so
one of the objectives of a trial balance
is to ensure the earth metrical accuracy
secondly if there is a summary at one
glance we get all the balances at one
place and finally it is the basis it is
the basis for the preparation of the
final accounts for the profit and loss
and the path