The statement is prepared in the form of schedule containing two columns (One for debit balances, the other for credit balances ). If the books of accounts are arithmetically accurate, then the two sides of the trial balance must tally.
The trial balance however, proves only one aspect of the ledger accounts ie . the equality of debit and credit entries. It does not prove that transactions have been correctly analyzed and
recorded in the proper accounts. Despite this limitation however, the trial balance serves the following purposes:
a. It provides proof for the arithmetical accuracy of the accounting entries
b. It forms the basis for preparing the financial statement such as the profit and loss account and the balance sheet, and
c. It summarizes the entire ledger accounts thereby making it possible for the position of a particular account to be judged simply by looking at the trial balance
A profoma of a trial balance is as follows:
TRIAL BALANCED
N/B (1) all debit balances in the ledger are listed in the debit column of the trial balance and
(2) all credit balances in the ledger are listed in the credit column of the trial balance.
Illustration:
Assume the same information as in question number four above, extract the trail balance from the ledger .
Trial balance
Particulars |
Debit |
Credit |
Cash |
91,000 |
|
Bank |
117,550 |
|
Capital |
136,00 |
|
Sales |
208,00 |
|
Okeafor’s account |
10,000 |
|
Purchases |
75000 |
|
Advertising |
1000 |
|
Rent |
5000 |
|
Mohammed |
8500 |
|
Repairs |
5000 |
|
Assets (machine) |
10000 |
|
Wages and salaries |
40000 |
|
Discount allowed |
1450 |
|
Discount received |
500 |
|
354500 |
354,500 |
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