Some Important Objectives of Accounting of Trial

Balance

Whenever you solve a problem in mathematics it is important to check and verify if it

has been correctly solved. You may opt for any of the several ways available of

verifying the solution. Same approach goes for accounting of trial balance where you

encounter a number of figures to deal with at the same time. A professional

accountant needs to make sure that the ledgers he or she has prepared are correct in

terms of balancing both debit and credit, remaining amount, etc. To check this

accuracy of figures, a statement called trial balance is prepared. Let’s cover some

needful objectives about accounting of trial balance.

Check Arithmetical Accuracy

Arithmetical accuracy means to validate if actual figures or

amounts are entered in the correct side of correct account

while posting transactions from various accounting books

like Purchase Book, Sales Book, Cash Book, etc. Not only

the correct balances of ledger accounts but also the totals

of special purpose books are verified.

Helps In Preparing Financial Statements

Every business prepares financial statements like balance sheet, Cash flow statement, etc. at the end of each accounting year. The balances in ledger accounts are available in trial balance statement and these figures are then used to prepare these financial statements

and conduct their analysis.

Helps Is Catching Errors

If totals of two columns of the trial balance statement equals that shows the arithmetical accuracy in ledgers. However, if values of both columns do not tally that means there is one or more errors in some of the ledger accounts. This prompts accountants to locate critical errors.

Helps In Comparative Analysis

The balances of ledger account with corresponding balances of previous years accounts helps the management in taking critical decisions regarding expenses, sales, revenues and profits, production costs, etc. You can also figure out the trend of above stated business components. These figures can be taken from the trial balance statements of two years.

Helps In Necessary Adjustments

When preparing financial statements adjustments like prepaid and outstanding

expenses, closing stock, service revenues, account receivables, etc. are to be

cleared is when trial balance comes in. It helps in finding the items requiring

adjustments relevant to be added in financial statements. Trial balance is ideally

prepared at the end of the business year, however, the above entries can occur

anytime during the year requiring to be adjusted in financial statements.

Helps In Audit Reports

Balancing all debit figures with credit ones is one of the most critical tasks of any accountant. Trial balance assists auditors to make decisions whether all entries have been recorded in the original books of accounts. Auditors are able to further comment if the accounting process of business is effective and efficient enough or not.

Decisions Regarding Financial Budget

Comparisons of two or three year trial balance statements helps financial analysts to create

trends regarding the business growth and performance. Also financial budget can be

decided for next and upcoming years that assists management decisions at the top level.

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