PREPARATION OF TRIAL BALANCE- PRICEDURE

1. As the trial balance is prepared on particular date that particular date should be shown in the head of trial balance.
2. Trial balance is prepared in the form of statement containing so no, Name of the account, ledger Folio, debit balance and credit balance.
3. The debit balance of the accounts are to be written in debit column, where as credit balanced of the accounts to be written in the credit column of trial balance. The totals of both columns should be equal, it proves arithmetical accuracy.

Aspects to be considered while preparing trial balance

First prepare the format of trial balance showing heading with date on which it is prepared. Whenever the balance of ledger accounts are given based on the nature of the account decide whether the account us debit or credit.

Generally the accounts which show debit balance are the accounts of various assets, expenses and losses, debtors, drawings etc. The accounts which show credit balance are capital accounts, loan a/c, profit and gains a/c etc.

METHODS OF PREPARING TRIAL BALANCE

A trial balance can be prepared in the following two methods.

1. Totals method

Under this method, debit total and credit total of each accounts of ledger are recorded in trial balance. In this method, all accounts of ledger without balancing them will be totalled and recorded in trial balance in their respective rows.

2. Balances method

Under this method, only balance of each account in ledger is found out and recorded in trial balance. All the accounts at end of the year are balanced from the view point of trial balance. All the accounts may be grouped into the following three types.

A. Account showing debit balances.

B. Account showing credit balance

C. Account showing nil/ no balance

While preparing the trial balance all the accounts with debit balance are shown on the debit side of the where as all the accounts with credit balances are shown on the credit side of trial balance.

MERITS AND DEMERITS OF TRIAL BALANCE

Merits of trial balance

1.  It helping in finding out the arithmetical accuracy of the accounts in the ledger.

2. Trading, profit and loss account and balance sheet are prepared on the basis of trial balance.

3.it will help in detecting the errors in the books of accounts and in their rectification.

4. Trial balance enables us to know balance of all accounts in one place.

Demerits of Trial balance

1. Trial balance tallied even though errors are existing in the books of accounts.

2. It is only possible to prepare trial balance of an organization, if the double entry system is followed, which is costly and time consuming.

3. Even if some transactions are omitted the trial balance tallies

4. Trial balance us not prepared in a systematic method the final accounts prepared. On the basis of trial balance do not depict the actual financial position of the concern.

TRIAL BALANCE, FEATURES OF A TRAIL BALANCE

Trial balance is a statement in which debit and credit balances of all ledger accounts are shown to test the arithmetical accuracy of the books of account. Trial balance is ledger is not conclusive proof of accuracy of books of accounts.

Features of a trial balance

1. It is not an account, it is only a statement which is prepared to verify the arithmetical accuracy of ledger accounts.

2. It contains debit and credit balances of ledger account.

3. It is prepared on a particular date generally at the end of business year.

4. Trial balance helps in preparing final accounts.

5. As it is prepared by taking up the ledger account balance, both debit and credit side of a trial balance are always equal.

6. The preparation of trial balance is not compulsory. There is no hard and fast rule in this regard.

BANK RECONCILIATION STATEMENT IMPORTANCE

Bank Reconciliation statement, is a statement prepared at periodical intervals, with a view to indicate the items which cause disagreement between the balances as per the bank columns of the cash book and the passbook, on any given date.

Importance of bank reconciliation statement

A. Similarity of balance between cashbook and passbook canbe confirmed by accountant, with the help of bank reconciliation statement.

B. It also helps, to detect, any mistakes that have taken place in both the cash book and passbook.

C. It also prevents the frauds, by recording disagreement between both balance.

D. Any undue delay in the clearance of cheque will be shown up by the reconciliation statement.

E. This statement is prepared only by business concerns.

F. To reveal exact cash balance lying with the bank.

TYPES OF CASH BOOK

The form of cash book mainly depends on the need, size and network of the business. There are different types of cash books maintained by business organizations. They are.
1. Simple cashbook or single column cashbook or one column cash book.
2.Double column cashbook or two column cashbook.
A. With cash and discount columns.
B. With bank and discount columns
3. Three column cashbook or triple column cashbook.
4. Analytical petty cashbook.

IMPORTANCE OF CASH BOOK

Among the entire subsidiary books cash book is one of the important book. In this book, we record particulars of receipts and payment of money. The main objective of cash book, is to know the balance of cash at any given time. The person who maintains this books is knowns as cashier. It records only one aspects of transaction i.e. cash. The number of cash transaction are more in the business, so the cash book should be prepared and maintained with utmost care.

Business transaction are mainly of two kinds

1. Cash transaction.

2. Credit transaction.

 The credit transactions of the business are recorded in the related subsidiary books. All cash transactions should be recorded in a separate book known as cashbook.

Cash transactions are of two types

1. Cash receipts

2. Cash payment.

 Cash receipts should be recorded on debit side and cash payments the credit side. The difference between total and credit total reveals the balance of cash.

Generally cash book shows debit balance. Business organisations can not pay more than what they receive. In other words cash receipts are more than cash payments or both may be equal.