What is trial balance? Features and objectives

Introduction

The main objective of Accounting is to ascertain the profit and loss and financial position of the business. The profit and loss  and the financial position of the business can be ascertain by preparing the final accounts. The final Account is prepared on the basis of the various balance accounts in the ledger. The ledger accounts are spread over many pages of ledger or over different ledgers like the debtors ledger,  the creditors ledger and the general ledger. So the various pages of ledger or the different ledgers have to be gone through by the the accountant to ascertain the balance of various ledger accounts. Such a step is inconvenient an takes more time to prepare the final accounts. To overcome this problem a list of balances of various ledger account, called the trial balance is prepared by the accountants as on the closing date  of the accounting year. When there is a trial balance prepared as on the last date of accounting period, the balances of all the ledger accounts are found in a single list, which will facilitate the easy and quick preparation of Final Accounts.

Definitions

Carter - "Trial Balance is the list of debit and credit balance, taken out from ledger, it also includes the balance of cash and bank taken from cash book"

Features of trial balance

These are the following features of trial balance 

1. It is just an statement and not an account.
2. It is neither a part of double entry system, nor it appears in the actual books of accounts.
3. It is a list of balances of all ledger accounts and cash book.
4. It can be prepared at any time during the accounting period , say, at the end of every months, every quarter or every year. Generally it is prepared at the end  of accounting year before preparing final accounts.
5. It is always prepared on a particular date and not for a particular period.
6. It is prepared to check the arithmetical accuracy of the ledger accounts and the cash book.
7. The total of debit and credit amount columns of the trial balance must tally.
8. A tallied trial balance is not a conclusive proof of accuracy of accounts.

Objectives of preparing Trial Balance

A trial balance is prepared with the following objectives:-

(1) To ascertain the arithmetical accuracy of ledger accounts  : A trial balance is prepared to check the arithmetical accuracy of ledger accounts. If the sum of debit and credit columns of trial balance is accurate. This is because if every debit we go an equal credit.

(2)  Completion of double entry : It proves that both the aspects of each transaction are recorded. If total of both sides are equal, it is believe that the records are complete and reasonably trustworthy. But if they do not tally, it is certain that some errors exist and efforts are made to locate them. Locating the errors is an important objective of trial balance.

(3)  Ledger account balances : It is a consolidated summarised statement of balances of accounts on a certain date. It enable one to know the details of assets, liabilities, expenses, losses, incomes etc.

(4)  To help in the preparation of final accounts : A trial balance is used as a connecting link between the ledger and final accounts. Trading and profit & loss account, and balance sheet are prepared on its basis. Thus, it's underlying Objective is also to help in the preparation of final accounts.