Today on this blog we are going to be looking at the topic that says "Trial Balance". These topic is mostly treated by business administration students and those who do banking and finance in the University.
This is to tell you that the word trial balance also have a particular role to play in the area of taking calculations, if not so, I wouldn't have written on the topic or even think of putting it here on my blog.
Moreover, having seen a lot of people in different field of profession who never for once attended or did business studies in time past or in college, ask questions like:
- What is the use of trial balance and how does it work
- In a lay man understanding, what is trial balance?
- And lastly the Definition of trial balance?
I will like to assure you that by the time I'm done explaining everything you need on this topic there would be no more problem of you having a misunderstanding on how trial balance work in the area of business.
What is Trial Balance
In the area of business, buying, selling and keeping records of each transactions. A trial balance is said to be the listing of a ledger account.
In this ledger accounts a trial balance will have and must show the total of every calculations in columns this columns must also be described either as a debit column or a credit column.
This is because trial balance is meant for keeping records. After the keeping the records it is highly expected of a trial balance account to show the correct stats of the credit and debit columns as well as making sure the two columns agree together.
This is why in banks and private loan organisation, the ledger accounts are been kept correctly under the principle of double entry.
The principle of double entry will help and avert the mistake of having errors in calculating the total figure in a ledger account but this doesn't necessarily mean that ledge account are completely error-free.
So let's take a look at the functions of trial balance and the need they serve in the area of business studies.
This is a List of the most important Functions of a Trial Balance
1. Number one Is that a Trial balance has the attributes of showing the total of every calculation at once. This is because figures are being summarized in trial balance by giving the total of every transaction in the general ledger.
2. The second best functions of a trial balance is that the ledger account will always show the proves of accurate arithmetic without you stressing out yourself again on it.
3. The overall best function of a trial balance is that the trading account, profit and loss account, and the balance sheet are all product of trial balance.
You should also take note that in trial balance, every debit data entry u make, will and must have to align with the credit data entry as well.
This is so that in every calculation you make there will have to be an equal to each other for in trial balance the law of division must be equal and not to be higher than.
Conclusion
Having seen the definition, functions and importance of a trial balance you have seen that the trial balance in a lay man understanding simply means the extraction of figures from different various account, the role of these figures I'd to show a perfect correct total balance of each an every calculation.
And when an imperfect balance is found in a trial balance then it means that their is an error in the ledger account and balance.
In my next post am going to be writing on the format of a trial balance, this topic will open your eyes on how to draft a trial balance as well as giving you the list of formats that is been used in drafting trial balance.
This is a video of a man who is using a trial balance sheet
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