Question

What is the purpose of a trial balance?

Identify the three types of trial balances prepared.

Compare and contrast the three types.

List three specific errors that a trial balance would detect.

List three specific errors that a trial balance would not detect.

Answer 1

Purpose of trial balance is to show the summary of T-accounts on a particular date so that financial statements can be prepared, based on balance on a particular date. Trial balance is also called summary statement because it shows the year end balance in all the accounts in ledger.

Three types of trial balance are (1) before adjustment Trial balance (2) After adjustment Trial balance (3) Closing Trial balance

Major difference between all the three trial balances are as follows (1) before adjustment trial balance are prepared without considering the year end adjustment (2) When adjustments are made at year and then balances of before adjustment trial balance are adjusted and a new trial balance is prepared with the adjusted balances this is called adjusted trial balance. after preparing the closing entries and when these closing entries are posted on trial balance then temporary accounts are closed and then a trial balance with permanent account of balance are prepared that is called closing trial balance.

Errors Disclosed by a Trial Balance

(1) Posting of the Wrong Amount:

(2) Posting an Amount on the Wrong side of the Account:

(3) Posting Twice to a Ledge

Errors not Disclosed by a Trial Balance

(1) Errors of Principle (2) Errors of Omission (3) Posting to wrong account