FINANCIAL ACCOUTING FINANCIAL ACCOUTING PRESENTATIONPRESENTATION

FINANCIAL ACCOUTING FINANCIAL ACCOUTING PRESENTATIONPRESENTATION

ON ON

TRIAL BALANCETRIAL BALANCE

MEANING :- Trial balance is a statement

prepared with the debit and credit balance of the ledger accounts to test the arithmetical accuracy of the books.

FEATURES OF TRIAL BALANCE

1. . It is a list of balances of all ledger accounts and cash books.

2. It is not a part of the double entry system of book keeping. It is only a working paper.

3. It can be prepared on any date.4. It verifies the arithmetical accuracy of

posting of entries from the journal to the ledger.

5. It is not a conclusive of proof of the accuracy of the books of account since some errors are not disclosed in trial balance for ex: errors of principle

METHODS OF PREPARING A TRIAL BALANCE

There are 2 methods of preparing a trial balance :-

1. Balance method2. Total method

BALANCE METHOD • In this method only debit and

credit balances are entered separately in the two columns this is known as net trial balance. This is the most commonly used method of preparing a trial balance because it facilitates the preparation of final accounts.

TOTAL METHODIn this, the total of each side of

the account is entered respectively in the debit and credit columns of the trial balance . Such a trial balance is known as cross trial balance .

CAUSES OF DISAGREEMENT OF TRIAL

BALANCE

TYPES OF ERRORS 1. ERRORS AFFECTING TRIAL

BALANCE 2. ERRORS NOT AFFECTIN THE

TRIAL BALANCE

ERRORS AFFECTING TRIAL BALANCE

If a trial balance does not tally , it will indicate that certain errors have been committed which have affected the trial balance

1. Wrong posting:- if a total of cash book or other book

is wrong the trial will not tally. For ex:- total of purchase book is

overcast by 1000

2. Posting to the wrong side:- if instead of posting an amount on

the debit side of an account , it is posted on the credit side the trial balance will not tally.

3. Omission:- Omission of posting an amount of a

side of a entry For ex: 500 have been received

from ram correctly in the cash book but omitted and to be posted to the credit side of ram’s account

4. Double posting in a single account:-

Ex: 500 have been received from r correctly in cash book but posted twice in the credit side of R ’s account.

5. Errors of totaling:-Errors may occur in the totaling of

debit side or credit side of account in the ledger.

ERRORS NOT AFFECTING TRIAL BALANCE

• Errors of omission:- If a transaction unrecorded either in the

journal it will be treated as error of omission , such an error will not affect the trial balance.

• Error of commission:-If wrong amount is entered in the journal or

subsidiary books the trial balance will tally because the same amount will be posted in both account affected by transaction.

• Compensating error:-If the effect of one error is

different by the effect of some other error such errors are called compensating errors.

For ex : posting on the debit side of A’s account 50 instead of posting 500 and while posting on the debit S account 500 are posted of 50.

• Error of principle :-The errors are committed in those

cases where a proper differences between capital and revenue item is not made

For ex : 1 when a capital expensive is treated as revenue expense

2 when a revenue expense is treated as capital expense

Amount spent on the repair of old machinery debited machinery account.

PRESENTED BY:- SAKSHI GUPTA