In trial balance, the treatment of the general reserve is that it is presented on the credit side. A trial balance is a statement prepared to check the arithmetical accuracy of the books of accounts. It features the closing balances of all the assets, liabilities and equity of a business. General reRead more
In trial balance, the treatment of the general reserve is that it is presented on the credit side.
A trial balance is a statement prepared to check the arithmetical accuracy of the books of accounts. It features the closing balances of all the assets, liabilities and equity of a business.
General reserve is a free reserve created out of revenue profits of a business to meet future needs and uncertainties. By free reserve, we mean dividends can be freely declared and distributed out of it.
Since the general reserve is an internal liability i.e. liability to the owner or owners or the business, it has a credit balance and is hence shown on the credit side of the trial balance.
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Definition The trial balance is a list of all the closing balances of the general ledger at the end of the year. Or in other words, I can say that it is a statement showing debit and credit balances. A trial balance is prepared on a particular date and not on a particular period. Importance As the tRead more
Definition
The trial balance is a list of all the closing balances of the general ledger at the end of the year. Or in other words, I can say that it is a statement showing debit and credit balances.
A trial balance is prepared on a particular date and not on a particular period.
Importance
As the trial balance is prepared at the end of the year so it is important for the preparation of financial statements like balance sheet or profit and loss
Purpose of trial balance which are as follows:
Preparation of trial balance
Methods of preparation
These are two methods that you can use to prepare trail balance, now let me explain to you in detail about these methods which are as follows:-
Balance method
Total amount method
Steps to prepare a trial balance
A suspense account is generated when the above case arises that is trial balance did not agree after transferring the balance of all ledger accounts including cash and bank balance.
And also errors are not located in timely, then the trial balance is tallied by transferring the difference between the debit and credit side to an account known as a suspense account.
Rules of trial balance
When we prepare a trial balance from the given list of ledger balances, the following rules to be kept in mind that are as follows :
Are placed in the debit column of the trial balance.
Are placed in the credit column of the trial balance.
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