I need to know the reasons, why do we prepare trial balance?
Charles from Tanzania
Trial balance is not just list of debit and credit balance of ledger's all accounts but it is very useful tool to find the mathematical correctness in the books of accounts. If trial balance's debit balances column does not match with credit balances column, it means there is big mathematical errors in our journal entries, ledger accounts or totally or transferring the figure. With this clue, we can easily reach our mathematical mistakes. After rectifying it, we can make correct financial statements.
Following are the main reason of Preparing Trial Balance:
1. Helpful to Find Transposition Error
Sometime, we can do mistake of transposition. Trial balance can help us to find this error. Find the difference of total of debit balances of trial balance and credit balances of trial balance. If it divides with 9, it means, we wrongly write any balance in trial balance. For example, we can write wrongly 525 as 552.
2. Helpful to Find Mis-calculation Error
This error may happen due to our poor calculation power. Trial balance's both side will not match. If we do not calculate any ledger balance correctly, we can see error in trial balance. Sometime, we may wrongly calculate total of any side of trial balance.
3. Helpful to Find Duplication Error
Sometime, we can write any ledger balance two times in trial balance. At that time, our trial balance will not match. If we will not make trial balance, how can we find this error?
4. Helpful to Find Omission Error
If we forget to write any ledger balance in trial balance, at that time our trial balance will not match. Check all ledger account and see which ledger account's balance did not send to trial balance.
5. Helpful to Find Wrong Side Error
Under this error, we wrongly write debit balance as credit balance in ledger accounts or in trial balance or vise-versa.
Related : Accounting for Beginners