TRIAL BALANCE
A trial balance can be defined as a report that lists all account balances to verify that total debits equal total credits,
ensuring the accuracy of financial records.
example
| Account Name |
Debit (₦) |
Credit (₦) |
| Cash |
200,000 |
|
| Accounts Receivable |
150,000 |
|
| Inventory |
100,000 |
|
| Accounts Payable |
|
80,000 |
| Capital |
|
300,000 |
| Revenue |
|
70,000 |
| Total |
450,000 |
450,000 |
In this example, the total debits (₦450,000) equal the total credits (₦450,000), confirming the accounts are balanced.
USES OF TRIAL BALANCE
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Identifies mistakes by ensuring debits equal credits.
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Forms the basis for Financial Statement Preparation.
-
Helps assess the balances of all accounts.
-
Aids auditors in verifying financial records.
-
Provides financial data for Management decision-making.
THE BALANCE THAT FORMS A TRIAL BALANCE
-
Assets: Cash, accounts receivable, inventory, and fixed assets.
-
Liabilities: Accounts payable, loans, and other obligations.
-
Equity: Owner's capital, retained earnings, and dividends.
-
Revenues: Sales revenue, service income, and other income sources.
-
Expenses: Operating expenses, cost of goods sold, and other expenditures.
