Question

Q: Explain the purpose of preparing trial balance.

Answer 1

Purpose of preparing trial balance:

• A trial balance is the list of all general ledger accounts including revenue, expenses and capital. Each nominal account will hold either debit or credit balance.
• Trading profit and loss, balance sheet financial reports can be produced using the ledger account.
• It will list ending balance in each ledger account. The total amount of debit and credit should match properly.
• From trial balance it easy for the accountant to prepare balance sheet during the year end. It will save time and provides accurate information.
• Trial balance helps to reduce material errors in accounting reports. Final account and income statement is prepared from the ending balances of general ledger.

Hence these are the main purpose of preparing trial balance.

All the best for your exam!