What Is A Trial Balance And Its Importance (Part 1)

In the syllabus of GCE O Level Principle Of Accounts, we need to understand:

1. What is a trial balance( a statement of ledger balances on a particular date)
2. Demonstrate how to extract a trial balance
3. Able to explain the uses and limitations of a Trial balance.
4. Able to identify and explain those errors which do not affect the trial balance-omission, commission, principle, compensating, original entry and reversals
   

This article Part 1 describes what is a trial balance and its importance

A Trial Balance Is:-

• A list/statement/worksheet of all the account balances of the general ledger at a particular point in time from which the Income Statement and Balance Sheet of a business is drawn up. The mechanism for listing these debit and credit balances from the ledger at a particular date are as follows:
  · An account has a debit balance when its debit total exceeds its credit total
  · Assets, expenses and drawings accounts have debit balance.
  · An account has a credit balance when its credit total exceeds its debit total
  · Liability, capital and revenue accounts have credit balances.

The Importance Of A Trial Balance

• The Trial Balance is prepared in each financial period as a summary of the closing of the previous ledger which proves the arithmetic accuracy of the ledger entry.
• In bookkeeping, this is a useful tool for checking the accounting entries prior to doing the period-end processing.
• Trial Balance reflects all the activity for an account or accounts within a selected date range. It shows the balance of the account at the beginning of the date range, the activity within the date range, and the balance at the end of the date range.