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ACCA Applied Knowledge · Financial Accounting · Trial balance

Which statement best describes the role of the trial balance in preparing financial statements?

The trial balance is a list of all ledger account balances at a date, showing debits equal credits, and it provides the starting figures from which the statement of profit or loss and statement of financial position are drafted after adjustments. It is not a published statement and does not prove complete accuracy.

  1. AIt is a list of all ledger balances at a date, used as the starting point for drafting the statement of profit or loss and statement of financial positionCorrect
  2. BIt is a formal financial statement that must be published under IFRS
  3. CIt proves that all transactions have been recorded in the correct accounts and at the correct amounts
  4. DIt replaces the need for adjustments such as accruals and depreciation

Explanation

The trial balance lists ledger balances and checks that total debits equal total credits, and the figures, adjusted for year-end items, are used to draft the financial statements. It is not a published statement, does not prove accuracy of classification or amounts, and adjustments are still required afterwards.

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