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The Purpose and Limitations of A Trial Balance

When is the trial balance prepared? What is the purpose of preparing a trial balance? What does the trial balance tell you? What does the trial balance not tell you? Why not use the Trial Balance to report financial information internally and externally? What limitations does it have over formal financial statements?

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A trial balance is prepared after all of the journals have been posted to all of the ledgers for the period under consideration (generally a month) but before the financial statements have been prepared. It is used both as a checksheet to verify that all accounts with balances will be included in the financial statements and that the total debit balances equal the total credit ...

Solution Summary

This solution answers the following questions: When is the trial balance prepared? What is the purpose of preparing a trial balance? What does the trial balance tell you? What does the trial balance not tell you? Why not use the Trial Balance to report financial information internally and externally? What limitations does it have over formal financial statements?

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