What is the fundamental purpose of preparing a Trial Balance?
ATo calculate net profit or net loss for the period
BTo verify the mathematical equality of total debit balances and total credit balances in the ledger
CTo measure company cash flow
DTo satisfy external audit mandates
Explanation
Core Concept: A Trial Balance lists all general ledger accounts with their debit or credit balances to ensure total debits equal total credits. Context/Distractors: A balanced trial balance does not guarantee error-free bookkeeping (e.g., omitted entries, posting to wrong account, or compensating errors won’t break trial balance equality). Exam Tip/Key Fact: Trial balance is an internal tool prepared before financial statement construction.
Exam Relevance
- Topic: Financial Accounting
- Subtopic: Trial Balance & Errors
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