Trail Balance and Final Accounts from the Financial Book
1st thing is trail balance purpose. It is prepared to check not only arithmetical accuracy of ledger balances but also to take an overview of the operations of the business as on a particular date. It is prepared on the basis of weekly, monthly, quarterly, half yearly and yearly. A trail balance contains the elements of financial statements – assets, liabilities, equity, income and expenses.
How to Prepare Trail Balance
I will give an example of trail balance preparation. We make an assumption that the capital of M/s XYZ as on 1st August 2006 was Rs. 1, 05,000 then the format will be:
Trail Balance As on 31st August, 2006
This is not solved. It is only format of trail balance sheet.
Final Accounts
Final accounts popularly known as the profit and loss account and the balance sheet are together called the final accounts.
Now, I want to let you know about the terms of trail balance and final accounts.
Error of Principle is the term of balance accounting and it is known as a principle and concepts. It is an error and it is committed because of lack of proper knowledge of accounting principles or concepts of finance.
Like it there are some more – error of omission, error of commission, compensation error, trading account, profit and loss account, profit and loss appropriation account, balance sheet, suspense account, gross profit and net profit. These terms are commonly known for trail balance and final accounts chapter. I will write about in the further chapter as more details.
