The balance standing in various accounts in the ledger at the end of a period are listed down in the form of a statement, showing debit balances in one column and the credit balances in another column, known as a “Trial Balance”.

The “Trial Balance” is nothing but a summary of various transactions entered in the Books of Accounts and its preparation is based on the rule that “for every debit there is a corresponding and equal credit”, so the totals of the debit balances must be equal to the total of the credit balances.

Objectives of the TRIAL BALANCE:

The following are the objectives of preparing the Trial Balance:
• To ascertain the arithmetical accuracy of the ledger accounts.
• To help in locating errors.
• It facilitates the preparation of the final accounts, i.e., the Trading and Profit and Loss Account and the Balance Sheet.

A Trial Balance may be prepared at any time but it must be prepared at the close of the accounting year.

After the preparation of Trial Balance, to know the profit earned or loss incurred, a business organization needs to prepare the Trading Account and Profit and Loss Account and by preparing the Balance Sheet it is possible to know the financial position of an organization. These statements put together are generally known as Statements of Final Accounts.