Trial Balance - a few words of Warning

The Trial balance is prepared to check the accuracy of the bookkeeping process.

It is an internal Accounting report and therefore not usually available outside the accounting department.

It is vital that the Trial Balance 'balances' before the external Accounting reports the Balance sheet and Profit & Loss Statement are prepared.

However a balanced Trial Balance does not guarantee that there are no mistakes in the Accounting system.

For example, it will not pick up any transaction that has

• been missed completely.
• been processed back to front
• the debit placed on the credit side - and the credit placed on the Debit side.
• been debited or credited correctly but posted to the wrong account.

Nevertheless because of the errors the Trial Balance can pick up it is a vital check on the accounting system.

Practice Exercises
You should attempt exercises 2.1, 2.2, 2.3, and 2.4

Exercise

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