ACCA Applied Knowledge · Financial Accounting · Trial balance
Which of the following is a purpose of the trial balance in the preparation of financial statements?
The trial balance lists all ledger balances and is the starting point for drafting the financial statements, after year-end adjustments. It does not prove transactions are in the correct accounts, valued correctly or free from misstatement.
- AIt proves that every transaction has been recorded in the correct account
- BIt provides the list of ledger balances from which the statement of profit or loss and statement of financial position are drawn, after adjustmentsCorrect
- CIt confirms that closing inventory has been correctly valued
- DIt provides evidence that the financial statements are free from material misstatement
Explanation
The trial balance lists all ledger balances and is the starting point for the financial statements once year-end adjustments are made. It does not prove correct classification, valuation or absence of misstatement, since many errors leave it balanced.
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