HomeTrial balance


Trial balance is a list of ledger accounts balances, showing debit balances and credit balances, separately on a certain date. Trial balance is only a statement not an account. As we learned, every transaction has equal debit and credit aspects so that the trial balance possesses equal debit and credit balances.

Trial balance preparation

You need to arrange all ledger balance accordance with its balances. All debit balance ledger should be on debit column and credit balance should be on credit column and finally total both the sides. The total of both sides must equal. If it doesn’t match; something went wrong in ledger posting or ledger balancing.

A trial balance tests the arithmetical accuracy of ledger posting before using it to the balance sheet, by ensuring both sides are equal. If both sides are equal we say trial balance is tallied or agreed. However tallying trial balance cannot ensure the 100% accuracy. There may be errors like compensating error which can be find out only after scrutinizing ledger posting .We will discuss trial balance and errors on next chapter.

Examples of Trail Balance

Let’s begin from the scratch, consider the following example of M/s Ideal Stores a whole sale merchant. On 1st April 2016 had the following assets and liabilities:

Liabilities Asset
Sundry Creditors Cash In Hand 12000
Thomas Trading 42000 Standard Chartered Bank 500000
Micheal food products 208000 Stock of Goods 246000
Key Foods International 300000 Furniture & Fittings 150000
 Capital  994600 Sundry Debtors
Sweet World 154600
Krishna Store 82000
Amandum Traders 400000
 Total 1544600  Total 1544600

Transactions of Ideal Traders on April 2016

Date Transactions details Amount
2/4/2016 Sold to Keys Foods International on credit 52400
3/4/2016 Received from Krishna Store on account 50000
3/4/2016 Allowed A Discount to Krishna store 2000
6/4/2016 Withdraw cash from bank for office purpose 50000
7/4/2016 Paid wages 42500
10/4/2016 stationery purchase for cash 1600
12/4/2016 Brought Goods from  city traders 342800
13-04-2016 Goods returned to city traders due to damage 24500
15-04-2016 Cash received from Keys foods  deposited into bank 30000
16-04-2016 Sold goods to sweet world 72400
18-04-2016 Sweet world  returned goods for 12800
20-4-2016 Sent cheque to city traders   on account 200000
21-04-2016 Sent cheque to Micheal food products in full settlement of their account 200000
24-04-2016 Paid rent 10000
24-04-2016 Bought office safe by cheque 50000
26-4-2016 Advertising charges paid to Business standard 5000
28-4-2016 Bought computer 24500

Now we have the opening balance or last year balance sheet and current month ( April 2016 ) transactions to start with. Let’s bring the opening balances and ongoing transactions into journal book.

Learn: How to journalise transactions

Here is the journal entry for above opening balance and transactions.

M/S Ideal stores
Journal Book
Date Particulars……………………….……..Dr LF Debit Credit
1/4/2016 Cash in Hand…………………………..Dr 12000
Standard Chartered Bank……….Dr 500000
Stock of Goods……………………….Dr 246000
Furniture & Fittings ………………Dr 150000
Sweet World…………………..……..Dr 154600
Krishna Store………………….……..Dr 82000
Amandum Traders…………….…..Dr 400000
Thomas Trading 42000
Micheal food products 208000
Key Foods International 300000
Capital 994600
1544600 1544600
( Asset, Liabilities & capital as on this date)
2/4/2016  Keys Foods International—— Dr 52400
To;  Sales A/c 52400
( Being goods sold to Key international on credit)
3/4/2016 Cash —————Dr 50000
To; Krishna Store 50000
( cash recived from Krishna store)
3/4/2016 Discount —————Dr 2000
To; Krishna Store 2000
( cash recived from Krishna store)
6/4/2016 Cash —————Dr 50000
To; Standard chartered Bank 50000
(Cash withdrawn for office purpose)
7/4/2016 Wages ………………….Dr 42500
To; Cash 42500
( wages paid for the week)
10/4/2016 Printing & Stationery 1600
To; Cash 1600
( being stationery purchase)
12/4/2016 Purchase A/c ………….Dr 342800
To; City Traders 342800
(Being goods purchased from city traders)
13/4/2016 City Traders…………….Dr 24500
To; Purchase Retrun 24500
( Goods returned due to damage)
15/04/2016 Standard chartered Bank….. Dr 50000
To; Key foods International 50000
(Cash received from keyfoods deposited in to bank)
16/04/2016 Sweet World……………Dr 72400
To; Sales 72400
( Sales to sweet world)
18/04/2016 Sales return ……………Dr 12800
To; sweet world 12800
( being goods return by sweet world)
20/04/2016 City Traders…………….Dr 200000
To; Standard chartered Bank 200000
(being payment made to city traders through cheque)
21/04/2016 Micheal food products………Dr 208000
To; Standard chartered Bank 200000
” Discount Received 8000
( being cheque issued for full settlement  rs 8000 adjusted as discount received )
24/04/2016 Rent………………Dr 10000
To; Cash 10000
( rent paid for the month)
24/04/2015 Furniture & Fitting 50000
To; Standard chartered Bank 50000
(bought office safe by cheque)
26/04/2016 Advertising ………………Dr 5000
To; Cash 5000
(Advertising charges to Business standard)
28/04/2016 Computer ……………Dr 24500
To;  cash 24500
( computer purchased for office)

Now various books and ledger account of Ideal Traders April 2016 are written up as follows. If you don’t know ledger posting click here.

Cash in Hand A/c

Ledger account -cash in hand

Standard Chartered Bank A/c

Standard Chartered Bank ledger

Furniture & Fitting A/c

Furniture and fittings ledger

Sweet World A/c

Sweet World Account

City Traders A/c

City Traders Account

Krishna Stores A/c

Krishna Store Account

Amandum Traders A/c

Amandum traders

Thomas Trading A/c

Thomas trading account

Micheal Food Products A/c

Micheal food product ledger

Key Foods International

Key food international

Sales A/c

Sales Account

Sales Return A/c

Sales return account

Purchase A/c

Purchase ledger

Purchase Return A/c

Purchase return account

Discount Received A/c

Discount received account

Discount Allowed A/c

Discount allowed account

Wages A/c

Wages Account

Printing & Stationery

Printing and stationery ledger

Rent A/c

Rent Account

Advertising A/c

Advertising Account

Computer A/c

Computer ledger

Now,Since the posting has been completed we are in a position to prepare the Trail Balance.

How to prepare Trail balance

The trail balance preparation process is simple, You just need to extract all balances from the ledgers on a particular date and place the name of the ledger and balances in a sheet called trail balance. Ledger with debit balance should be written on the debit side of the trail balance and ledger with credit balance should placed on the credit side of  the trail balance. The Total of the both the sides should be tallied.

The Format of Trail Balance

The trail balance is usually headed with “Trail Balance as at….. ( DATE) as the balance shown are relating to a particular date.In the Following Trail  balance of M/s Ideal as at 30 April 2016, a folio column is given showing the name and page of the ledger from which the balance was extracted.

Note: Only the stock at the beginning of a period appears in the trail balance.The stock at close should not ordinarily appear in the trail balance. In this example we did not prepared a ledger for the stock, So extract the stock amount from the opening balance given.

Format of Trail balance

Let’s explain items in the table

Ledger: Organisations are using different Ledger books, for different types of transactions, like a ledger book for sales, ledger book for debtors, purchases etc. If you are using different ledger the name should be entered here

Account: Each and every account balance in a ledger book

Folio No: The Page number of Ledger book in which the account balance exists.

Uses of trial balance

  • The trail balance provides proof that the ledger is in balance.
  • The Agreement of the debit and credit totals of the trail balance gives assurance that

1.Equal debits and credits have been recorded for all transactions

2.The debit or credit balance of each account has been correctly computed

3.The addition of the account balances of each account has been correctly computed.

Errors in Trail balance

Suppose that the debit and credit totals of the trail balance do not match indicates that errors in Trail balance. some of such errors are

  • The entering of debit as credit or credit as debit
  • Totalling mistake in balancing
  • Account balance copied wrongly into trail balance
  • Entering debit balance into credit side of trail balance and vice versa.

Limitations of trail balance

Trail balance does not prove that all transactions have been posted and analysed into proper ledger accounts. For example cash payment transaction wrongly debiting cash and crediting expense account, still trail balance tally. or if we are omitting some transactions for recording into ledger, still trail balance tally. Trail balance only proves only the equality of debit & credit.

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