What Is A Trial Balance?
Trial balance is a statement which shows the balance of each and every account opened in the ledger. The main objective of preparing trial balance is to ascertain the arithmetical accuracy of ledger accounts before the preparation of financial statements. Trial balance tallies when the total of debit balances and total of credit balances is the same. A tallied trial balance indicates that equal debits and credits have been recorded in the ledger accounts whereas a untallied trial balance indicates that some errors have been committed. Trial balance can be directly used for preparing the financial statements. All income and expense accounts appearing in the trial balance are transferred to the trading and profit & loss account and all capital, liabilities and assets are carried over to the balance sheet.
Format Of A Trial Balance:-
The above format of trial balance is according to the Balance method. Balance method takes the balance of each ledger account. Balance method can be used only after balancing all the ledger accounts.
Trial balance can also be prepared according to the Total Amount method. Total amount method takes the total amount of debits and total amount of credits in each ledger account instead of balance. Total amount method does not require the balancing of ledger accounts.
Example Of Trial Balance:-
Below is the trial balance which is prepared by taking the balance of all the ledger accounts which we opened in the ledger example in the
journal and ledger topic. You can refer to it if you want.