Preparation
of Trial Balance is the third step in accounting process. It is preceded by
recording of transaction in subsidiary nooks and posting of the accounts in the
ledger, and succeeded by preparation of final accounts.
A
Trial Balance can be prepared at ant time as and when desired, but it must be
prepared at the end of each financial year after the accounts have been closed.
There are three methods of preparing the Trial balance.
1.
TOTAL
METHOD:-Under this method, every ledger account is
totaled and that total amount
(both of debit side and credit side) is transferred to trial balance. In this
method, trial balance can be prepared as soon as ledger account is totaled.
Time taken to balance the ledger accounts is saved under this method as balance
can be found out in the trial balance itself. The difference of totals of each
ledger account is the balance of that particular account. This method is no
commonly used as it cannot help in the preparation of the financial statements.
2.
BALANCE
METHOD:- Under this method every ledger account
is balanced and those balances
only are carry forward to the trial balance. This method is used commonly by
the accountants and helps in the preparation of the financial statements.
Financial statements are prepared on the basis of the balance of the ledger
accounts.
3.
TOTAL
AND BALANCE METHOD:- Under this method, the above two
explained methods
are combined. Under this method statement of trial balance contains seven
columns instead of five columns. This has been explained with the help of the
following example:
|
S.No.
|
Heads
of Account
|
Debit
Total
|
Credit Total
|