Limitation of Trial Balance

Trial balance has some limitations that may limit its effectiveness. The purpose of trial balance is to verify the accounts mathematical correctness.

Capital and Revenue Income-Expense

Money spent on acquiring fixed assets is called capital expenditure. It’s not always easy to distinguish between capital and revenue expenditures.

Adjusting Entries and Procedure

Adjusting entries are journal entry that adjusts the balance of certain accounts to show the correct balance in the financial statements.

Methods of Preparing Trial Balance

All ledger accounts are recorded on a separate sheet under the debit and credit columns, and the totals are matched to preparing trial balance.

Trial Balance

A trial balance is a statement prepared for the purpose of verifying the mathematical correctness of the accounts with the debits n credits.