1. What is a trial balance?
Trial balance is simply the list of ledger accounts’ balances. There are two main sides or parts of a trial balance, one for debit balances and other for credit balances of ledger accounts (or accounts). Both sides need to be equal.
2. What is the procedure of preparing a trial balance?
Step No. 1: Look up the closing balances of all ledger accounts and collect them
Step No. 2: Post the closing balances to trial balance. Debit balances entered in the debit column of trial balance and credit balances will go to the credit column of the trial balance along with their accounts names which are placed in description column
3. What is the difference between a trial balance and ledger accounts?
An account is a record of financial transactions of a specific item (item such as purchases, sales, commission etc) and contains the detail of transactions.
On the other hand, a trial balance merely lists down debit and credit closing balances of accounts to check the mathematical accuracy of accounts
4. What is the difference between a trial balance and balance sheet?
A Trial balance list down the debit and credit closing balances of all ledger accounts to check the mathematical accuracy of accounts. The ledger accounts can be associated with income, expenses, assets, liabilities and capital
Whereas, a balance sheet is a statement or report that lists down the balances of capital accounts, liabilities accounts and assets accounts to the show financial position of a business entity at a specific point in time not to check the mathematical accuracy of accounts.
5. What is an adjusted trial balance?
An adjusted trial balance is the List of all debit and credit balances of all ledger accounts or 'T' accounts related to an enterprise or business after making the adjusting entries.
6. What is the difference between an unadjusted and an adjusted trial balance?
An adjusted trial balance is the List of all debit and credit balances of all ledger accounts or 'T' accounts related to an enterprise or business after the adjusting entries have been made.
On the other hand unadjusted trial balance is prepared before passing the adjusting entries.
7. What is a key benefit of preparing a trial balance?
Trial balance helps in confirming the total debit balances and total credit balances of all ledger accounts are equal. Therefore, it is helpful in checking the arithmetical accuracy of ledger accounts.
8. What errors can cause debit side and credit side of a trial balance to be unequal?
- Recording only one aspect of a transaction such as debiting but not crediting or crediting but not debiting.
- Wrongly calculating the balance of ledger accounts
- Debiting more amount and crediting less amount or crediting more amount and debiting less amount of a transaction
9. Are there errors that don’t affect a trial balance agreement?
These errors won't affect trial blance agreement:
1. Error of omission
2. Error of commission
3. Error of principle
4. Error of compensation
5. Error of complete reversal of entries
6. Error of original entry
7. Error of transition
10. What are the various methods of preparing a trial balance?
There are two method of preparing a trial balance
- Traditional method of preparing a trial balance
- Modern method of preparing a trial balance
11. What are the two main purposes of preparing a trial balance?
Trial balance is prepared:
- Because it checks the arithmetic accuracy of ledger accounts
- It helps in preparing financial statements such as income statement, balance sheet etc.