3 At the end of the lesson, students should be able to : ObjectivesAt the end of the lesson, students should be able to :know what is a Trial Balance.know the uses and limitations of Trial Balance.identify and explain those errors that will affectand those that will not affect the Trial Balance.know how to extract a simple Trial Balance.
5 It is a statement of all the balances What is a Trial Balance?It is a statement of all the balancesfrom the ledger and cash book on aparticular date.Total debits should be equal to totalcredits.Total DebitsTotal Credits
6 A trial balance looks like this… Trial Balance as at 31 Dec 2000DebitCredit$$Capital ,500CashBank ,650Purchases ,900Returns OutwardsSales ,680Debtors ,930Returns InwardsDrawingsWages16,33016,330
7 Uses and Limitations of Trial Balance… Test the equality of the recorded debits andcredits.If the total debit is not equal to the credit,it reveals the presence of some errors duringthe process of journalising or posting.
8 Uses and Limitations of Trial Balance… A Trial Balance that balances does notnecessarily prove that all the transactionshave been recorded.There are some kinds of error that can stillcause the Trial Balance to balance and noteasy to detect.
9 Errors that can affect the Trial Balance: Errors of calculationErrors of omission of one entryPosting to the wrong side of an accountErrors in amount
10 Errors not revealed by the Trial Balance: Errors of omissionErrors of commissionErrors of principleComplete reversal of entriesCompensating errorsErrors of original entry