Preparation of Trial Balance

Theoritically spreading, a trial balance can be prepared in the following three

ways:

(i) Totals Method

(ii) Balances Method

(iii) Totals-cum-balances Method

1. Totals method

Under this method, total of each side in the ledger (debit and credit) is ascertained

separately and shown in the trial balance in the respective columns. The total of

debit column of trial balance should agree with the total of credit column in the

trial balance because the accounts are based on double entry system. However,

this method is not widely used in practice, as it does not help in assuming accuracy

of balances of various accounts and and preparation of the fianancial statements.

2. Balances Method

This is the most widely used method in practice. Under this method trial balance

is prepared by showing the balances of all ledger accounts and then totalling up

the debit and credit columns of the trial balance to assure their correctness. The

account balances are used because the balance summarises the net effect of all

transactions relating to an account and helps in preparing the financial

statements. It may be noted that in trial balance, normally in place of balances

in individual accounts of the debtors, a figure of sundry debtors is shown, and

in place of individual accounts of creditors, a figure of sundry creditors is shown.

3. Totals-cum-balances Method

This method is a combination of totals method and balances method. Under

this method four columns for amount are prepared. Two columns for writing

the debit and credit totals of various accounts and two columns for writing

the debit and credit balances of these accounts. However, this method is also

not used in practice because it is time consuming and hardly serves any

additional or special purpose.

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