An accounting process that is used by companies to record the balances of their ledger account in their respective debit or credit column, trial balance is generally being formulated by companies on periodical bases. The broad-spectrum rationale of drafting a trial balance is to make sure that all the entries recorded during a fiscal year an authentic and mathematically accurate (Groves & Pendlebury, 1990).
Trial balance is considered as an important tool for the company as it provides them the accuracy of their financial operations particularly accounting entries. in other words trial balance provides the actual summary of companies financial ledger accounts and if the debit and the credit sides is balance then it gives a proper indication that companies financial operation are authentic and accurate.
On the other hand, trial balance of the company is considered as the foundation of the formulation of company's income and balance sheet, and if companies fail to formulate the trial balance then it will become extremely difficult and impossible for them to construct their other financial statements. In addition to this, trial balance can be calculated using two ways that are total trial balance method, and balance trial balance method (Guay, 2000).
Example of Trial balance
XYZ Company
Trial Balance For the period 31st 2012
Debit
Credit
Cash
xxx
Account receivable
xxx
Supplies
xxx
Equipment
xxx
Accounts payable
xxx
Owner Capital
xxx
Owner Drawing
xxx
Sales
xxx
Salary Expense
xxx
Misc Expense
xxx
xxx
xxx
Net Book Value
In general accounting net book value of the company is described as the value of company's asset obtains after deducting the value of its liabilities and intangible assets. The book value of the company could also be described as its total worth after paying off its debt amount.
In addition to this, Net Book value is considered as one of the most important and popular financial tool in evaluating the financial stability of the company. Another important aspect of the net book values is that it would never become equal to the market value of the company for several reasons (Guay et al, 2005).
Firstly, because assets on the balance sheet are recorded at their cost, which means that in case of change in market value of assets companies are not, allowed to change the recorded value on the balance sheet. Secondly, a company that is observed of holding maximum amount of real estate assets on its yearly balance sheet will most eventually has the higher book value
Example
Net book value of equipment = actual value - depreciation amount- amortization amount
Machinery = $200000 - 20000- 10000
= $ 170000
Article of association
An official document the clearly explains the rules and regulation through which company completes if daily operations. In simple words, this document describes the general objectives of the company and explains the process through which company ...