Trial Balance

What is a Trial Balance?

A trial balance is a report that lists the balances of all general ledger accounts of a company at a certain point in time. The accounts reflected on a trial balance are related lớn all major accountingAccountingAccounting is a term that describes the process of consolidating financial information lớn make it clear & understandable for all items, including assetsTypes of AssetsCommon types of assets include current, non-current, physical, intangible, operating, & non-operating. Correctly identifying và, liabilities, equity, revenues, expensesFixed và Variable CostsCost is something that can be classified in several ways depending on its nature. One of the most popular methods is classification according, gains, & losses. It is primarily used lớn identify the balance of debits và credits entries from the transactions recorded in the general ledger at a certain point in time.

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Below is an example of a Company’s Trial Balance:

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In addition to error detection, the trial balance is prepared to lớn make the necessary adjusting entries to the general ledger. It is prepared again after the adjusting entries are posted to lớn ensure that the total debits và credits are still balanced. It is not an official financial statementThree Financial StatementsThe three financial statements are the income statement, the balance sheet, & the statement of cash flows. These three core statements are. It is usually used internally & is not distributed khổng lồ people outside the company.

What does a trial balance include?

A trial balance includes a các mục of all general ledger tài khoản totals. Each account should include an trương mục number, description of the account, và its final debit/credit balance. In addition, it should state the final date of the accounting periodAccounting CycleThe accounting cycle is the holistic process of recording & processing all financial transactions of a company, from when the transaction for which the report is created. The main difference from the general ledger is that the general ledger shows all of the transactions by trương mục, whereas the trial balance only shows the account totals, not each separate transaction.

Finally, if some adjusting entries were entered, it must be reflected on a trial balance. In this case, it should show the figures before the adjustment, the adjusting entry, and the balances after the adjustment.

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Undetectable errors in a trial balance

A trial balance can trace the mathematical inaccuracy of the general ledger. However, there are a number of errors that cannot be detected by this report:

Error of omission:The transaction was not entered inkhổng lồ the system.Error of original entry: The double-entry transaction includes the wrong amounts on both sides.Error of reversal:When a double-entry transaction was entered with the correct amounts, but the account to be debited is credited & the account to lớn be credited is debited.Principle error:The entered transaction violates the fundamental principles of accounting. For example, the amount entered was correct và the appropriate side was chosen, but the type of an account was wrong (e.g., expense trương mục instead of liability account).

Additional Resources

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