A business will prepare trial balances on a periodic basis. It is generally done once the reporting period concludes. The primary intention of preparing trial balances is to make sure that the entries in an organisation’s records and bookkeeping facilities are factually correct.
Understanding Trial Balance
Producing a trial balance of an organisation will serve to find out mathematical and factual inaccuracies that may have happened in the double-entry system of accounting. If the total debits match the total credits, then the trial balance is said to be under balance. At the same time, there shall be no inaccuracies in the company’s ledgers.
Nevertheless, this in no way implies that the company’s records and accounts are error-free. For instance, the transactions that are considered improper or those that just go onto be missing from the company’s system will still be a case for an accounting error. This may not be detected every time by the process of trial balance.
Organisations at first will record their financial transactions in their bookkeeping accounts inside the main ledger. On the basis of the kinds of business transactions that have gone by, accounts in the ledgers may have recorded debits and credits over a given accounting timeframe prior to being used on a trial balance worksheet.
Further, few accounts might have been made use of to record several financial transactions. Due to this, the final balance of every ledger account, as displayed in the trial balance worksheet, would be the summation of all credits and debits that were made an entry of into the accounts on the basis of all relevant financial transactions.