Some Important Objectives of Accounting of Trial Balance

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Some Important Objectives of Accounting of Trial
Balance
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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. Lets
cover some needful objectives about accounting of
trial balance.
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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.
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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.
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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.
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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.
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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.
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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.
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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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