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Trial balance has the following special features:

  1. The trial balance is prepared on a specific date. That is why, we use the word ‘as on with its heading.
  2. Trial balance contains the list of all ledger accounts including cash account.
  3. Trial balance may be prepared with the balances or totals or balances and totals of ledger accounts.
  4. The total of the debit and credit column of the amount must be equal.
  5. In case the debit and credit side of the trial balance are equal, we assume that the principles of ‘Double Entry System’ and the assumptions of accounting equation have been observed.
  6. 6. The difference between the debit and credit side of the trial balance points out that certain mistakes have been committed somewhere.
  7. 7. If both the debit and credit sides have the same total, it does not mean that there is no mistake in accounting.

 

PURPOSE AND FUNCTIONS OF TRIAL BALANCE

The Trial balance is prepared with the following purpose:

  1. Test of arithmetical accuracy. Trial balance is the test of accuracy of arithmetical calculations. If correct posting has been made from subsidiary books and ledger accounts and correct figures have been recorded and copied, the debit and credit total of the trial balance must tally.
  2. Summarized information of ledger accounts. Trial balance contains a list of all ledger accounts. It presents the names of ledger accounts and the amount of their debit or credit balance. The summarized position of ledger accounts can be obtained at a glance from the trial balance. It would have been very difficult to assess the position of different ledger accounts from subsidiary books and ledger accounts.
  3. Basis for preparing final accounts. The ultimate end of maintaining books of accounts is to ascertain the result of the business in term of profit and the value of different assets and liabilities. For this purpose, we prepare a profit and loss account and balance sheet on the basis of information supplied by the trial balance. It is, in this way, a source statement for preparing final accounts.
  4. Helpful for making adjustments. While making final accounts certain adjustments regarding closing stock, outstanding and prepaid expenses, accrued and unearned income are to be made. While identifying items for adjustments, we will have to study the information furnished by the trial balance.