CMA Foundation · Fundamentals of Financial and Cost Accounting · Trial Balance
Which one of the following is an objective of preparing a trial balance?
One objective of a trial balance is to give a consolidated summary of ledger balances, which serves as the basis for preparing the financial statements. It does not remove errors of omission, does not replace the ledger, and does not show market values of assets.
- ATo provide a summary of ledger balances that helps in preparing the financial statementsCorrect
- BTo eliminate errors of omission and compensating errors
- CTo replace the need for the ledger
- DTo determine the market value of assets
Explanation
A trial balance summarises all ledger balances in one place, which forms the basis for preparing the income statement and balance sheet. It cannot eliminate errors; it only helps locate some of them. It does not replace the ledger, nor does it show market values since accounts record historical cost.
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