CMA Foundation · Fundamentals of Financial and Cost Accounting · Trial Balance
Which of the following best describes the primary purpose of preparing a trial balance at the end of an accounting period?
The main purpose of a trial balance is to check arithmetical accuracy of the ledger by confirming that total debit balances equal total credit balances. It is not a financial statement, so it does not show profit or financial position, and it cannot guarantee that all entries are correct.
- ATo confirm that total debit balances equal total credit balances in the ledger accountsCorrect
- BTo ascertain the net profit earned during the year
- CTo show the financial position of the business on a given date
- DTo prove that every transaction has been recorded in the correct account
Explanation
A trial balance lists ledger balances and checks the arithmetical accuracy of double entry, i.e., debit totals equal credit totals. It does not show profit (the income statement does) or financial position (the balance sheet does). It also cannot prove that every transaction is posted to the correct account, since several errors do not affect agreement.
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