SECTION E PREPARING A TRIAL BALANCE AND ERRORS

1.    Trial balance

a) Explain the purpose of the trial balance.

A trial balance is the summary of all the ledger account balances at a particular point in time. It’s a tool of internal check to ensure that errors are identified before figures are reported in final accounts. An error is likely to exist if debit and credit balanaces do not matches up.

Yet the purpose can be mentioned in points as set out below:

         To reveal the errors before the preparation of final accounts.

         To confirm arithmetical accuracy of the ledger accounts

         To help in locating errors

         To provide a basis for preparing the financial statements

         To ensure that each debit in the books of accounts has a corresponding credit

Sample format

Details	Dr ($)	Cr ($)
Cash	x
Inventory	x
Payables		x
Share Capitals		x
Retained Earnings		x
Other Accounts etc.		x
Total	x	x