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Definition: Trial Balance refers to a schedule, in which the balances of all ledger books are assembled into debit and credit columns, to check the arithmetical accuracy of the entries posted in the ledger accounts.
Trial Balance is a tabular statement, containing a specified date on which it is prepared, indicated at the top of the statement. The balances of all the assets, expenses, losses, drawings, cash and bank account are taken to the debit column whereas the balances of all the liabilities, incomes, gains, capital are transferred to the credit column.
Companies prepare trial balance periodically, usually at the end of the financial year which forms a basis for preparing final accounts. However, it can be prepared otherwise also, subject to the accounts are balanced.
When the total of debit and credit columns are equal, then the trial balance is regarded as balanced, i.e. the accounts are mathematically accurate, however, certain errors are still there, that might have occurred during journalizing and posting the entries into a ledger.
Trial Balance prepared to verify as to whether the totals of the debit column equals the total of credit columns.
Trial Balance is the third step of the accounting process, wherein once the accounts are posted in the ledger, a statement is prepared to show the debit and credit balances. It is prepared by listing all the accounts and then entering them in their respective columns.
The totals of the debit and credit columns must agree irrespective of the method is used for preparing Trial Balance. This is because of the dual effect, i.e. every debit has an equivalent credit, and it indicates that the trial balance does not contain any clerical errors. However, this is not absolute proof of accuracy, as an error of principle, an error of omission and compensating errors may still be there.
Suspense account is a temporary account is created when there is a disagreement in the debit and credit column of the trial balance after carrying forward all ledger account balances and errors are not detected at the right time, then the trial balance is equalized by transferring the difference of the two sides in this account, so as to proceed further and prepare final accounts.
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