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TRIAL BALANCE
When posting of all the transactions into the Ledger is
completed and the accounts are balanced off, it
becomes necessary to check the arithmetical accuracy
of the accounting work. For this purpose the balance of
each and every account in the Ledger is put on a list.
The list so prepared is called a trial balance..
Trial Balance may be defined as a statement which
contains balances of all ledger accounts on a particular
date.

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FORMAT

Particulars

Trial Balance
As on March 31, 2009

L.F

Dr Balance
(in Rs)

Cr.
Cr Balance
(in Rs)

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OBJECTIVES OF PREPARING A TRIAL

BALANCE
Following are the objectives of preparing Trial Balance
(i) To check arithmetical accuracy
(ii) To help in preparing Financial Statements
(iii) Helps in locating errors
(iv) Helps in comparison
(v) Helps in making adjustments
Trial Balance is generally prepared at the end of the year.
However it can be prepared at any time during the
accounting year to check the accuracy of the posting.

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METHODS OF PREPARATION OF
TRIAL BALANCE
A) Total Method : In this method , after totaling each side of
the ledger account, the respective debit and credit totals
of the ledger accounts are transferred to the respective
sides of the Trial Balance

Particulars
Cash A/c
Capital A/c
Purchases A/c
Total

Trial Balance
As on March 31, 2009

Cr.
Dr Balance Cr Balance
L.F (in Rs)
(in Rs)
25,000
12,000

7,000
20,000
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METHODS OF PREPARATION OF TRIAL

BALANCE
b) Balance Method: According to this method, every ledger
account is balanced and only the balance of the ledger
account is carried forward to the trial balance.

Particulars
Cash A/c
Capital A/c
Purchases A/c
Total

Trial Balance
As on March 31, 2009

Cr.
Dr Balance Cr Balance
L.F (in Rs)
(in Rs)
18,000
12,000

20,000
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TYPES OF ERRORS
The errors can be broadly classified as

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ERRORS of PRINCIPLE

When a transaction is recorded in contravention of

accounting principles.
For example: Purchase of machinery debited to
purchases account.
Effect: In this case, there will be no effect on Trial
Balance as these amounts are correctly placed on the
correct side though in the wrong account.

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CLERICAL ERRORS
These errors arise because of mistakes committed in the
ordinary course of accounting work. These are of three
types:

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Errors of Omission

If the transaction is completely or partially omitted in the

books of accounts. Errors of Omission can be complete or
partial.
Examples:
Complete: Purchased goods for Rs 5000. Entry not
recorded. In this case trial balance will match
Partial: Purchased goods on credit for RS 2000 from Ram
In this
case trial balance will not match.

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Errors of Commission

If while making an entry, the wrong amount is written

either in Journal or in the ledger, or entry is made in the
wrong side of the account, the error will be an error of
commission.
Examples:
a) Errors in posting as to amount Rs 400 posted as Rs 40
b) Wrong totaling of accounts
c) Wrong balancing of accounts
d)
Posting the same amount twice to an account.

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Compensating errors

If the effect of the errors committed cancels out, the

errors will be called compensating errors.
The trial balance will agree.
For example: X account debited with Rs 150 instead of
Rs 120 and Y account with Rs 200 instead of Rs 230

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SUSPENSE ACCOUNT

A suspense account is an account in which the amount

of difference in the trial balance is put till such time that
errors are located and rectified.
When the errors affecting Suspense account are
located, they are rectified with the help of the suspense
account

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