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Trial Balance - A Starting Point for Final Accounts
Trial Balance - A Starting Point
for Final Accounts:
The
trial
balance is simply a list of
ledger
accounts balances at the end of an accounting
period. This summary of the ledger at the end of an
accounting period, is a convenient starting point in
the preparation of the final accounts i.e. trading
and profit and loss account and balance sheet.
A
trial
balance usually contains the following types of
balances:
Balances from expenses accounts
Balances from revenue accounts
Balances from assets accounts
balances
from liabilities accounts
Balances
from capital or owner's equity account
The first two
types of balances are transferred to trading and profit and
loss account to find out profit or loss.
The other
three types of balances are transferred to the balance sheet
to know the financial position of the business.
Thus we
prepare from the
trial balance a trading and profit and loss account by
matching revenue balance with expenses balances and by the
time we have finished, we have very much smaller
trial balance,
which is then arranged into a balance sheet.
