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Trial Balance is a link between Ledger and Final Accounts , because, after preparing ledger accounts, all the accounts, both Temporary Accounts and Permanent Accounts, are compulsory transferred to Trial Balance and then from Trial Balance to Final Accounts (Income Statement, Balance Sheet, Statement of Retained Earnings and Statement of Cash Flows) are Prepared. This process of transferring all accounts from ledger’s accounts to trial balance balance and then to final accounts is compulsory, otherwise, the Financial Statements do not give true and fair view of accounting information to users of financial statements. The debit balance’s accounts are recorded on debit side of trial balance and credit balance’s accounts are shown on credit side of trial balance. The total of all debits’s accounts must be equal to the total of all credit’s accounts, otherwise there may be certain errors, mistakes or frauds.. Moreover, although, the debit and credit accounts of trial balance ag...

Decrease In Owner's Equity Debit Or Credit Decrease in Owner’s Equity is debited as decrease in owner’s equity is unusual for such type of account. The normal, usual, favorable or positive balance for owner’s equity account is credit but unusual, unfavorable or negative balance is debit. When owner’s equity increases, we credit it and when it decreases, we debit it according to the Rules of Debit And Credit . Owner’s equity increases with increase in every revenue account and decrease with every increase in expense account as revenue increases with every credit amount and expense increases with every debit amount. Increase In Owner’s Equity Debit Or Credit Increase in owner’s equity is credited as with every increase in owner’s equity account, it is credited which is a favorable, positive, usual balance for owner’s equity account. For example, owner’s equity account is increased by Rs. 5000 when the revenue account of Rs. 5000 is earned by the business.

Losses Decrease Owner's Equity Account Losses decrease Owner’s Equity Account as loss are deducted in the calculation of owner’s equity account. Owner’s Equity = Opening Capital + Additional Capital + Net Profit - Net Loss - Drawings For example, Assets = Rs. 20000, Liabilities = Rs. 10000, Owner’s Equity = Rs. 100000. The net loss of Rs. 50000 for the period is reported in Income Statement of a sole proprietor’s business, Mr. A, then in Accounting Equation , we get the following   Assets = Liabilities + Owner’s Equity - Net Loss                                                                  20000 =     10000      +     600000            -     50000                  ...

The difference between the debit and credit side of an Account is called balance of an account and the process of finding the difference between the debit and credit side of an account is called Balancing of An Account . When the debit side of an account, such as an asset account, exceeds its credit side, then there is a debit balance as the total of debit column amount exceeds the total of credit column amount. Similarly, when the total of credit side is more than the total of debit side, then there is a credit balance of an account. The resulted balance, either a debit balance or a credit balance, is the Balance Carried Down (Balance c/d) to be transferred to Trial Balance . If there is a debit balance of an account, then the balance c/d is written on credit side and if there is a credit balance, then it is written on debit side of an account. For example, the balance c/d of a furniture account is Rs. 70000, which must go to Unadjusted Trial Balance for further proc...