Which Of The Following Statements Explains What A Trial Balance Is?

The correct answer of this multiple choice (mcq) is (D), as a Trial Balance is a confirmation that the sum of all the debit accounts’ balances, which include Expenses and Assets, equals to the sum of all the credit accounts’ balances, which include Revenues, Liabilities and Equity. This equality should maintain throughout the accounting period under the Double Entry System of Bookkeeping. So, we get the monetary value of list of all accounts at one place. After trial balance is prepared which is an Unadjusted Trial Balance, Adjusting Trial Balance in order to get the updated value of all the accounts that need Adjustments. This ADT forms the basis for the preparation of Financial Statements which are reported to Users of Accounting Information.

A TB is prepared for the current accounting period. The advantage of TB is that it detect posting errors, casting errors, one-sided errors, transposition errors, (where amounts are exchanged in part of other i.e., write the amount incorrectly as $517 instead of $715), transferring wrong carried down balances from a ledger’s account. Once the errors or mistakes are detected, these should be rectified as soon as possible to ensure correct, true and fair view of accounting data.

The option A is incorrect, as the trial balance does not show the equality between debit balances within the general ledger.

The option B is also wrong choice as a trial balance is prepared after the preparation of all of the ledger’s accounts balances in a classified manner during the accounting period.

The option C is also not correct as a trial balance fails to shows certain types of errors or mistakes due to which eventhough these errors exit but still there is a equality between the debit balances of all debit accounts and credit balances of all credit accounts and the trial balance agree. These errors include compensatory errors, Errors of Omission, Errors of Principle, etc.