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cashing_in · 07-15-2008, 04:42 AM

What is trial balance?

Those who are even a bit familiar to accounting must have had the gist; the trial balance we are talking about gets ready after every financial period meets completion to summarize the ledger of that period getting closed. The debit side must equal the credit side in a successful trial balance; if not, it denotes some sort of error in the double-entry system of the closed ledger. Credits are represented in a trial balance as a negative, rendering an apparently perfect trial balance as 0.

How is it calculated?

The purpose of calculating trial balance is to verify whether the sum of the debits is equal to the sum of the credits. It is prepared by considering the grand total of each of the two sides in every ledger account, in two ways:

• Total Method: In this method, both the debit and credit sides are summed up and placed in a single column.

• Balance Method: This process involves calculating the difference between every account. If the debit side appears greater, then the difference is inserted on an account’s credit side. This is called debit balance. Similarly, if credit side is bigger, the insertion occurs on the debit side. This is credit balance. The list of balances or the Trial Balance is then prepared by putting the debits and credits balances in individual columns.

07-15-2008, 04:42 AM	#4 (permalink)
cashing_in Status: n00b Join Date: Apr 2008 Location: VA Posts: 5	What is trial balance? Those who are even a bit familiar to accounting must have had the gist; the trial balance we are talking about gets ready after every financial period meets completion to summarize the ledger of that period getting closed. The debit side must equal the credit side in a successful trial balance; if not, it denotes some sort of error in the double-entry system of the closed ledger. Credits are represented in a trial balance as a negative, rendering an apparently perfect trial balance as 0. How is it calculated? The purpose of calculating trial balance is to verify whether the sum of the debits is equal to the sum of the credits. It is prepared by considering the grand total of each of the two sides in every ledger account, in two ways: • Total Method: In this method, both the debit and credit sides are summed up and placed in a single column. • Balance Method: This process involves calculating the difference between every account. If the debit side appears greater, then the difference is inserted on an account’s credit side. This is called debit balance. Similarly, if credit side is bigger, the insertion occurs on the debit side. This is credit balance. The list of balances or the Trial Balance is then prepared by putting the debits and credits balances in individual columns. __________________ The Marketing Guy Get quotes for Bookkeeping