A trial balance is a statement of debit andcredit balance of the ledger accounts which is prepared in order to prove the arithmetical accuracy of the books of account.

A trial balance is a statement of debit & credit balance of the ledger accounts which is prepared in order to prove the arithmetical accuracy of the books of account. It is prepared after the preparation of various personal, real & nominal accounts. It is also called the summary of assets, capitals, liabilities, expenses, income, etc. drawn from the ledger account.

According to R. N. Carter,“Trial balance is the list of debit and credit balances, taken out from the ledger; it also includes the balances of cash and bank taken from cash book.”

According to J. R. Batliboi,“Trial balance is a list of balances debit or credit standing in the books of a trader at any given date.”

From the above definitions, it is obvious that a trial balance is a list of debit and credit balances of all the ledger accounts extracted on a given date. It is not an account rather only a statement. It is not a part of books of accounts maintained under double entry system. It is the statement of debit and credit balances of all the assets, liabilities, capital, incomes and expenses. It is the prepared in a separate sheet of paper to verify the arithmetical accuracy of books of account.

A trial balance is prepared for following reasons: -

1. To obtain summary information
   It provides summary information of all the ledger accounts in one place. It presents the balances of all the assets, liabilities, capital, incomes and expenses relating to a particular date.
   
   
2. To help in making comparison and decision
   It helps in comparing the balances of assets, liabilities, capital, incomes, and expenses between two different periods. Such comparison helps in making aproper judgment of different activities of the business and arriving at important decisions.
   
   
3. To check arithmetical accuracy
   The trial balance checks an arithmetical accuracy of the books of accounts. It checks whether the total of debit balances equals the total of credit balances or not. If the trial balance agrees, it proves the arithmetical accuracy. If it does not agree, it indicates the existence of errors in the books of accounts, which are to be located and rectified.
   
   
4. To facilitate for preparing the final accounts
   It serves the basis for preparing the final accounts. From the trial balance, the balances of incomes and expenses are placed on the trading and profit and loss accounts and balances of assets, liabilities and capital are placed on the balance sheet.
   
   
5. To help for locating and rectifying errors
   It helps to locate the accounting errors at theearly stage. It's disagreement is the signal for the existence of accounting errors in the books of accounts, which compels the accountant to locate and rectify them in time.
   
   
6. To help in minimizing errors and frauds
   It helps in minimizing the different types of accounting errors and frauds. If the errors and frauds are committed, the trial balance disagrees. Hence, it gives moral pressure to the accounting personnel to maintain books of accounts with great care and honesty.

The following are the advantages of trial balance:

1. It verifies the arithmetical accuracy of recording and posting of financial transactions.
2. It facilitates for preparing final accounts.
3. It helps in locating, preventing and rectifying errors and frauds.
4. It helps in the internal audit by supplying complete, reliable and accurate accounting information.
5. It proves the authenticity of the balance sheet prepared by the business on the given date.
6. It presents the position of all the accounts in one place.

The trial balance can be prepared on daily or monthly or yearly basis as per the requirement of the business. It is prepared on a given date in a separate sheet of paper. It is prepared either using total method or balance method or compound method. The following are the procedures of preparing trial balance:

1. Total method
   Under the total method, the trial balance is prepared with the debit and credit totals of all the ledger accounts.
2. Balance method
   Under the balance method, the trial balance is prepared with the debit and credit balances of all the ledger accounts.
3. Compound method
   Under the compound method, the trial balance is prepared with the debit and credit totals and balances of all the ledger accounts. Hence, the compound method is the combination of total and balance methods, which is also known as total cum balance method.

Solution:

Trial Balance

Solution:

Trial Balance

Solution:

Trial balance