Objectives of Preparing a Trial Balance

(i) To check arithmetical accuracy

Arithmetical accuracy in ledger posting means writing correct amount,

in the correct account and on its correct side while posting transactions

from various original books of accounts, such as Cash Book, Purchases

Book, Sales Book, etc. It also means not only the correct balance of

ledger account but also the totals of the special purpose Books.

(ii) To help in preparing Financial Statements

The ultimate objective of the accounting is to prepare financial

statements i.e. Trading and Profit and Loss Account, and Balance sheet

of a business enterprise at the end of an accounting year. These

statements contain balances of various ledger accounts. As Trial

Balance contains balances of all ledger accounts, in financial statements

the balances of ledger accounts are carried from the Trial balance for

proper analysis.

(iii) Helps in locating errors

If total of two columns of the trial balance agrees it is a proof of

arithmetical accuracy in the ledger posting. However, if the totals of

the two columns do not tally it indicates that there is some mistake

in the ledger accounts. This prompts the accountant to find out the

errors.

(iv) Helps in comparison

Comparison of ledger account balances of one year with the

corresponding balances with the previous year helps the management

taking some important decisions. This is possible by using the Trial

Balances of the two years.

(v) Helps in making adjustments

While making financial statements adjustments regarding closing

stock, prepaid expenses, outstanding expenses etc are to be made. Trial

balance helps in identifying the items requiring adjustments in preparing

the financial statements.

Trial Balance is generally prepared at the end of the year. However

it can be prepared at any time during the accounting year to check the

accuracy of the posting