Ans 1.

A trial balance is a schedule or list of debit and credit balances extracted from various accounts in the ledger including cash and bank balances from cash book. Since every transaction has a dual effect i.e. every debit has a corresponding credit and vice versa, the total of the debit balances and credit balances extracted fromthe ledger must tally. Thus, at the end of the accounting period or at the end of each month, the balances of the ledger accounts are extracted and trial balance is prepared to test as to whether the total debits are equal to total credits or not.

Methods of Preparing the Trial Balance

(i) Totals Method: In this method, the totals of debit and credit sides of the ledger accounts are shown in the trial balance. The sum totals of debit and credit columns of the trial balance must be equal. This is less popular method.

(ii) Balances Method: In this method, the balances of ledger accounts are taken to respective debit and credit columns of the trial balance and then grand totals are taken out. The total of balances in the debit column must be equal to the total balances in the credit column of the trial balance.