SELECT * FROM question_mgmt as q WHERE id=4698 AND status=1 SELECT id,question_no,question,chapter FROM question_mgmt as q WHERE courseId=2 AND subId=11 AND chapterId=201 and ex_no='2' AND status=1 ORDER BY CAST(question_no AS UNSIGNED) CBSE Free NCERT Solution of 11th accountancy Trail Balance and Rectification of Errors describe the purpose for the preparation of trial

Question:

Describe the purpose for the preparation of trial balance.

Answer:

Trial balance is not the financial statements and it could not be submitted to the key end users instead of financial statements. This statement is prepared for the purpose of drafting financial statements, reviewing errors, checking mathematically correctness of entry, and so on.

Normally at the end of the period, the accountant might need to prepare the financial statements and other related financial reports for management.

Accountants need to make sure that the ledgers are correctly entered according to the accounting equation so that the financial statements are mathematically correct. This is the reason why an accountant needs to prepare a trial balance.

In short, trial balance is prepared for the purpose of identifying and detecting errors that enter in general ledgers. It is also used as the working papers for accountant and auditors in drafting financial statements.

As mentioned above, if the debit side is over the credit side, that means the accounting entry is not mathematically correct. In this case, the accountant needs to double check his accounting entries and classification.

Maybe the amount of the specific transaction is not equally entered between the debit side and credit side. Or maybe the classification is not correctly classified with respect to accounting equations.

It is important to note that trial balance could not detect all the errors that make during the entry. For example, the elimination of entities both in debit and credit still makes trial balance reconcile.

Trial balance is prepared in four or five columns and lists down all closing general ledgers by ranging the ledgers from assets account to liabilities and equity.

Income statements account like revenues and expenses are listed down subsequently after equity.

This is to make sure that the preparer of financial statements is easy to identify which items belong to assets, liabilities, equity, revenues and expenses.

The main important element that should include in this statement is the account name, reference, balance before adjustment, adjusting entry, and balance after adjustments.

Sometimes, this statement is printed out along with the five financial statements for management purposes. But it is generally not.


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