Characteristics of Trial Balance

Characteristics of Trial Balance

In this article we would explain some important characteristics of trial balance. The trial balance is basically a report of closing balances extracted from the general ledger.

Important Characteristics of trial balance

Some important characteristics of trial balance have explained in term of report, summary of closing balance, facilitation in preparation of financial statement and error detection.

1.   Report:

Trial balance is a kind of report that can be extracted from the General ledger. This report has two sides i.e. debit & credit Side. The debit side must equal to credit side. When debit side is equal to credit side, then trial balance is said to be agreed.

2.   Summary of Closing balances:

Trial balance typically is summary of closing balances appearing in the General ledger. This summary can be extracted any time. In computerized environment, this summary is available on one click.

3.   Adjusted & non Adjusted Trial balance:

Trial balance can be divided or classified into adjusted and non adjusted trial balance.Trial balance prepared before the year end adjustments like depreciation, prepaid, accrual is known as UN adjusted trial balance, where the trial balance extracted/prepared after accounting for the aforementioned transactions is called adjusted trial balance. It is important to note that financial statements are prepared from the adjusted trial balance.

4.   Facilitate Preparation of Financial Reporting

Trial balance facilitates preparation of financial statements. Trial balance provides basic information for the preparation of financial statements. This facilitation is more relevant in manual accounting.  In computerized accounting statement are automatically prepared by the accounting software.

5.   Error Detection

Trial balance also detects error which has single effect, when the debit side is not equal to credit side, and then it indicates of some error. This error detection concept is relevant in manual accounting, in computerized environment due to input controls, wrong transaction cannot be entered.

6.   Format of Trial balance

         

Account #	Account Decryption	Dr	Cr
Sales			10,000
Purchases		20,000
Cash			10,000
		20,000	20,000

7.   Characteristics list of Trial balance

Some important characteristic of trial balance are listed below

a.    It is a report and not a book.

b.    It is a summary of closing balance of general ledger accounts.

c.    It facilitates preparation of financial statements.

d.    It detects error with single effect. (Effect single side).