The mistake may have been made in the process of recording the assignments of debits and credits in one or more of the posting media; or it may have oc curred in the process of posting, or in the process of making the test itself. If, before posting, the equality of the debits and credits has been proved in our post ing media, one possible source of error has been elim inated; it is then clear that the error has been com mitted either in the posting or in taking off the trial balance.
4. Use of the trial balance.—The trial balance is usually taken monthly, for two reasons : (1) if an error-has been committed, it is easier to check over a month's business than to check over that of a longer period. Since statements of account are rendered to customers monthly, trial balances were originally made at the same interval, in order that they might be used to prove the accuracy of the customers' ac counts. (2) The trial balance, by being made up monthly, becomes a preliminary to the monthly state ment, as well as a check on the accuracy of the prepara tion of that statement. Since a trial balance presents a detailed record of every account and, as such a rec ord, shows the status of the business, it furnishes a very satisfactory means from which to prepare a statement of the firm's financial condition whenever that may be necessary. These statements, also, as will be explained later, are often prepared monthly.
5. Forms of trial balance.—There are two forms of trial balance: (1) a trial balance of footings, (2) a trial balance of balances. .
A trial balance of footings consists of an abstract of the debit and credit footings of all accounts in the ledger, or at least of all accounts whose individual debit and credit footings are not equal. The debit footings are placed in one column and the credit foot ings in another. For example, the following trial balance is a list of footings of every account that does not "balance," i.e., does not have equal footings.
If one desires to know whether a particular ac count has a debit or a credit balance, he must sub tract the smaller footing from the larger. The sole value of such a trial balance lies in the fact that it is the means of testing the equilibrium of the ledger. It requires the least possible number of arithmetical operations, and that means that the danger of com mitting errors in this process is greatly reduced.
A trial balance of balances consists of an abstract of the balances of all accounts found open in the led ger. An account will be footed and the balance, either debit or credit, will be ascertained. This bal ance will be entered in its proper column in the trial balance opposite the name of its account. When, on the one hand, the total debit postings to an account exceeds the total credit postings, that account is said to have a debit balance; on the other hand, when the aggregate credits to an account exceed the aggregate debits, the account is said to have a credit balance.
The process of taking a trial balance of balances involves not only the footing of the two sides of each account, but also, the subtraction of the smaller from the larger footing and, moreover, it must be deter mined whether the balance of any given account is a debit or a credit. The successful completion of these processes requires the most careful application. The trial balance of balances has the advantage of furnishing a convenient source for subsequent refer ence, since the balances, once computed, are always available.
6. Trial balance an aid to the preparation of finan cial statements.—In most modern business houses it is customary to prepare monthly statements of the fi nancial condition. Each month a statement of the op erations of that month, as well as a statement of the financial condition at the end of the month, is pre pared. Obviously, if more than one month has passed by, the trial balance of balances will show for each account the accumulation of the entries of two or more months. Because of this fact, accountants have been compelled to devise a means of obtaining a separate record of the month's transactions, in order that for the individual month may be pre pared.
7. Trial-balance book.—It is advisable to enter these trial balances monthly in a book prepared for that purpose. This book is known as a trial balance book. Each page has a double column for every month of the year, one column for the debits and one for the credits, covering the entire year. Since the columnar sheets are cut short, the name of the ac count need be entered only once. Thereafter the bal ance can be written at the end of each month in suc cessive columns. As new accounts are added to the records, they must of course be added in the trial-bal ance book.