Trial Balance :
Trial Balance shows the total closing balance amounts 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. it is the end of the accounting process. In the double entry accounting system, there is always the same amount of the Credit corresponding to every Debit. so, Total of trial balance always is equal if not then there is an error the in the posting of the transactions.
In a manual system of an accounting:-
An accountant needs to prepare the trial balance. He matched the Debit balance amounts with Credit balance amounts. If they agree it means that the trial balance has no error of omission, commission and etc.
Nowadays, in the computerised system of an accounting:-
Advantages of a Trial Balance
In the manual system:
- With the help of it, we will ensure that all the amount of Debit has the corresponding amount of Credit.
- It helps to identify the error of omission, commission and etc.
- It proves the arithmetical accuracy of the accounting work done by the bookkeeper.
The following advantages are common in both the system: –
In the computerised system
- It is also very useful for auditors, they will get the general ledger account balances prior to their proposed adjustments and after their proposed adjustments.
- The trial balance helps the accountant to prepare and finalize the financial statement for the year because it is the list of all debit and credit balances of leader accounts.
Method of Trial Balance:
The following are the three methods of Trial Balance: –
|1. Balance Method||In this Method, We take the Balance of Debit and Credit side of all ledger accounts.
(Most popular, simple and best method)
|2. Total Method||In this Method, We take the total of both Debit and Credit side of all ledger accounts.|
|3. Compound Method||This is the combination of above-said methods.|
The following are the examples of all methods of the Trial Balance: –
We are taking a single example and then we will prepare a trial balance with all the above-said three methods: –
Example 1: –
Prepare a trial balance of A&B co. as on 30/04/18 with all three methods.
|Land and Building||2,000,000|
|Furniture and fixture||230,000|
|05/04/2018||Purchase goods from M/s Ram and Sons.||250,000|
|05/04/2018||Paid Freight by cash||5,000|
|07/04/2018||Paid for Stationary Items||2,000|
|09/04/2018||Sold goods to Mr Parvesh Kumar||85,000|
|12/04/2018||Paid to M/s Ram and Sons by cheque||150,000|
|15/04/2018||Purchase goods from M/s Ram and Sons.||200,000|
|15/04/2018||Paid Freight by cash||3,000|
|18/04/2018||Sold goods to Miss. Deepika and payment received by cheque||125,000|
|21/04/2018||Payment received from Mr Parvesh Kumar by cheque||85,000|
|25/04/2018||Sold goods to M/s A&B Co.||135,000|
|28/04/2018||Sold Goods to M/s X&Y Co.||150,000|
First of all, we have to post all these above transactions in the journal.
- I have posted all the transaction in the journal but attached the file in PDF format because of the increase in the length of an article.
and after that, we have to post all journal entries in the ledger accounts. its also attached.
after taking the above steps we got a statement of ledger accounts including the total of the debit side, the total of the credit side and balances shown as the following: –
Now we will prepare Trial Balances with all three methods: –
In balance method, we have to post all the Debit balance shown in the column of “Balances” in the above statement of ledger accounts in trial balance column named “Debit Balances” and the credit balance in the column named “Credit balances”.
“Important Note: – Trial balance always has equal total in both the column named debit Balance and credit balances.”
In the Total method, we have to post all the total amount of Debit side of all ledger accounts shown in the column of “Debit Total” in the above statement of ledger accounts in trial balance column named “Debit Total” and the credit total in the column named “Credit Total”.
Trial Balance – Solved with Total Method
Trial Balance – Solved with Compound Method