Importance of Trial Balance

Importance of Trial Balance

Importance of Trial Balance

The reason of a trial balance is to establish that the value of all the debit value balances equivalent the overall of all the credit value balances. It helps to verify the mathematical correctness by showing the debit and credit balance of all the individual accounts. If the debit agrees with the credit of trial balance, the transaction is said to be accurate.

This is serves two main purposes. These are as under:

  • To check the equality of debits and credits – an arithmetical or mathematical test of accuracy.
  • To provide information for use in preparing final accounts.

This is important due to the following reasons

  • Trial balance summarizes all the financial transactions of the business.
  • Trial balance provides a check on the arithmetical accuracy of recordings of all the financial transactions of the business.
  • Trial balance helps in locating errors by providing a starting point for the location of errors committed if any.
  • Trial balance provides a basis for the preparation of final accounts.
  • It ensures that the transactions recorded in the books of accounts have identical debit and credit amount.
  • It shows that the balance of each ledger account has been computed correctly.
  • It shows that the balances of each and every ledger account have been transferred accurately and on the correct side of the sheet on which trial balance has been prepared

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