News Lawsuit Residuum - Meaning, Objectives, Methods, Rules In Addition To Format
After posting the accounts inwards the ledger, a contention is prepared to demonstrate the separately the debit in addition to credit balances. Such a contention is known equally Trial Balance.
Meaning:
A lawsuit residue is a listing of all the accounts which accept an outstanding balance. It checks the arithmetics to encounter if the full of the debits is equal to the full of the credits.
Objectives of Preparing Trial Balance
1. Trial residue helps to cheque the arithmetical accuracy of the accounts.
2. The fiscal statements equally prepared based on the lawsuit balance.
3. The lawsuit residue serves equally a summary of what is contained inwards the ledger.
Methods
1. Total Method: Under this method, every ledger concern human relationship is totaled in addition to that full amount (both credit in addition to debit side) is transferred to lawsuit balance. The divergence of totals of each ledger concern human relationship is the residue of that detail account. This method is non ordinarily used equally it cannot assistance inwards the training of fiscal statements.
2. Balance Method: Under this method, every ledger concern human relationship is balanced in addition to those balances solely are carried frontwards to the lawsuit balance. Financial statements are ordinarily prepared on the the world of this method.
3. Total in addition to Balance Method: As mention shows it is combination of inwards a higher house 2 methods. Under this method, contention of lawsuit residue shows to residue contains the residue inwards both ways equally explained inwards the inwards a higher house 2 methods.
Rules:
Following are the rules to stimulate lawsuit residue from Ledger balances:
1. The next balances must hold out placed inwards the debit side of the lawsuit balance:
• Asset Accounts
• Expenses Accounts
• Losses
• Drawings
• Cash in addition to Bank Balances
2. The next balances must hold out placed inwards the credit side of the lawsuit balance:
• Liabilities Accounts
• Income Accounts
• Profits
• Capital Account
Format of Trial Balance:
Example:
