To know the difference between the Trial Balance and Balance Sheet, first of all, we have to know the meaning of both terms. These are explained as follows: –
What is Trial Balance: –
Trial Balance shows the total closing balance of all the ledger accounts for the specific period i.e. for a month, for a quarter, for a six month, and for a whole year. In the double-entry accounting system, there is always the same amount of Credit corresponding to every Debit. So, the total of both columns (Debit & Credit) of the trial balance is always equal, if not then there is an error in the posting of the transactions.
To know the details about the Trial Balance, Please check out the following link:
What is the Balance Sheet: –
The Balance sheet is the statement showing the financial position of the business in a particular accounting period. It is a list of balances of ledger account of assets, capital, and liabilities. The value of assets shows which we can realize from the market and The value of Liabilities shows which we have to pay in the future. Capital shows the amount invested by the owner into the business entity. it is the basis of the following account equation.
“Assets = Capital + Liabilities“
To know the details about the Balance Sheet, Please check out the following link:
Chart of Difference between the Trial Balance and Balance Sheet: –
Basis of Difference |
Trial Balance |
Balance Sheet |
Meaning |
Trial Balance showing the equality of both columns i.e. Debit and Credit. | Balance Sheet showing the financial position of an entity. |
Object |
It is prepared to authenticate the arithmetical accuracy of recording and posting all business transactions. | It is prepared to show the true or fair financial position of an entity. |
Accounts Included |
It includes all types of accounts. i.e. Real, Personal and Nominal accounts | It includes only two types of accounts. i.e. Real and Personal accounts |
Net Profit/ Loss |
Trail balance does not contain any information about Net profit/loss. | The balance Sheet does provide information about net Profit/loss for the year under the head of capital. |
Dependency |
The trial balance is dependent on the ledger account and subsidiary books not on the balance sheet. | The balance sheet is prepared from the trial balance but it also can be prepared from ledger accounts. |
Necessity |
The trial balance is a summary of all ledger account balances. It is not necessary to prepare by any act or law. We have prepared it to simplify our process of preparing Financial Statements. | The balance sheet is necessary to prepare by law. |
Classification of Accounts |
In trial Balance, all accounts are classified into two categories the accounts with the debit balance and the accounts with the Credit balance. | In the Balance Sheet, only personal and real accounts are classified into the balance of assets, liabilities, and capital. |
Time of Preparation |
It is prepared before the preparation of Financial Statements. | It is prepared after preparing trading and Profit&Loss account. |
Effect of Adjusted entries |
The trial balance is prepared before any adjustments. | The Balance sheet is prepared after all adjustments. |
Name of heading |
Debit balance and Credit Balance | Assets and Liabilities(In horizontal form) |
Information about Stock or inventories |
In the trial balance, Information is provided only for opening stock. | In the Balance Sheet, Information is provided only for cLosing stock. |
Uses |
It has internal use only. | It has internal as well as external use. |
Financial Statements |
The trial balance is not a part of the financial statement but it is the base of financial statements. | The balance sheet is part of financial statements. |
Download the chart: –
The conclusion of Difference: –
There is much difference between these two statements. The trial balance is prepared to check the error in the process of accounting but the balance sheet is prepared to show the true financial position of an entity.
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