Question 6Q - Intermediate Accounting (Kieso)

Question

Is it necessary that a trial balance be taken periodically? What purpose does it serve?

Step-by-Step Solution

Answer

Yes, it is necessary to prepare the trial balance periodically. The main purpose of preparing a trial balance is to verify whether the entries made in the company's bookkeeping system are mathematically accurate.

Meaning of trial balance

A trial balance is a statement that depicts the sum total of debits and credits of all the ledger accounts with the purpose of checking the arithmetical accuracy of books of accounts.

Purpose of preparing a trial balance periodically

The necessity of preparing trial balance is as follows:

• It examines the correctness of the entries made; it justifies that the debit and credit balances are equal in the ledger.

 

• It supplies a list of ledger balances and their accounts which is beneficial for the preparation of financial statements and for the supply of accounting data of the business.

 

Therefore, the preparation of trial balance periodically is of great importance for the concern.