“A raw balance is a sheet which shows the mathematically correct balances of credit and balances shown in the ledger.” Here the sum of the loan balances and the sum of the deposit balances should be equal, then the raw sum is said to be mathematically correct
Raw totals are prepared on a day-to-day basis. E.g., Shri Ramanlal’s Dt. Raw balance as on 31-3-2010. The above title is given before preparation of raw balance. The balance shown in this raw balance is the final form of the account at the end of the accounting period.
(1) Characteristics of trial balance:
(i) It is a statement: The raw sum is in the form of a sheet. It does not count as an account.
(ii) Specific period: The period of raw summation is fixed. Generally raw balance is prepared at the end of accounting year for 1 year i.e. twelve months. A raw balance of less than 12 months can also be prepared.
(iii) Mathematical accuracy of accounts: All the loan balances and deposit balances shown in the ledger are shown here. The accuracy of the sum of these two balances is determined by the raw summation.
(iv) Double entry system: Where double entry system is used, raw balance is prepared.
(v) Pre-stage of final accounts: The raw accounts are prepared before the annual accounts of the business. As many errors as possible are detected before the annual accounts are prepared, so that the accounts present a true and fair view.
(2) Objectives of trial balance:
(1) Arithmetical accuracy: Arithmetical accuracy of ledger accounts is done by raw summation. The sum of loan balances and deposit balances is the same, it is checked.
(ii) Locating errors and their rectification: If the totals of loan and deposit balances are not equal by the raw summator, errors are detected.
(iii) Easy preparation of final accounts: Raw total is the first step before preparation of annual accounts. All possible errors are detected at this stage. So that errors in annual accounts remain minimal or no errors. So that annual accounts can be easily prepared on a fast basis.
(iv) Balances of accounts: The balances of all the accounts in the accounts are shown in the raw balance. So any account balance is available from the raw balance.
Raw balance is thus a very important part of the accounting system. If the raw sum shows the sum of both sides equal, then only non-mathematical errors remain to be found.
(3) Methods of preparation of a trial balance:
(1) Total method: In this method, the debit side and the deposit side of each account are summed up. The sum on the debit side and the sum on the credit side are shown. Eg, Ramesh sold goods on loan for ₹ 20,000. ₹ 18,000 cash received from Ramesh. ₹ 20,000 will be credited to Ramesh at the time of sale and ₹ 18,000 will be credited to him when he pays. The same amounts will be shown in the raw balance as ₹ 20,000 as debit side sum and ₹ 18,000 as deposit side sum. Generally this method is less popular.
