Trial Balance
A Summarized Statement Of Respective Ledger Accounts

At the close of the accounting period, after all the business transactions are being posted from journal into Ledger Accounts and after balancing of Ledger Accounts, the sum total of Debit must tally with the total of credit balance. To check the arithmetical accuracy of the Ledger Accounts, a Trial Balance is prepared balances of all the ledger accounts and finally summed up to see if the total of debit balances and the total credit balances tally each other. Disagreement of Trial Balance reflects some errors which must be detected and rectified if the accurate financial reports are to be drawn up.

A "Trial Balance" is a statement prepared periodically to verify the total of both the sides (Debit and Credit) of an Account.

As under the Double Entry System of Accounting, every debit has to have a corresponding credit, therefore; the total of debit side should be equal to the total of credit side.

To verify whether the total of both the sides of an Account tally each other, a Trial Balance is prepared.

Definition of Trial Balance:

"Trial balance is a statement, prepared with the debit and credit balances of ledger accounts to test the arithmetical accuracy of the books" – J.R. Batliboi.

Objectives of Trial Balance:

The objectives of preparing a trial balance are:

  1. To check the arithmetical accuracy of the ledger accounts.
  2. To locate the errors.
  3. To facilitate the preparation of final accounts.
Advantages of Trial Balance:

The advantages of the trial balance are

  1. It helps to ascertain the arithmetical accuracy of the books of account during the period.
  2. It facilitates as a one place ready reference of all the balances of the ledger accounts.
  3. If helps in detecting errors which can be rectified before preparing final accounts.
  4. It is the basis on which final accounts are prepared.
Methods of Preparing Trial Balance:

A trial balance can be prepared in the following methods.

i. The Total Method :

According to this method, the total amount of the debit side of the ledger accounts and the total amount of the credit side of the ledger accounts are recorded.

ii. The Balance Method :

In this method, only the balances of an account either debit or credit, as the case may be, are recorded against their respective accounts. The balance method is more widely used, as it supplies ready figures for preparing the final accounts.

Sundry Debtors and Sundry Creditors:

In the ledger there are many personal accounts, some of them may show debit balances, some others may show credit balances. If all the names are to be written in the trial balance it will be unduly long. Therefore, a list of names with the debit balances is prepared. This list is known as ‘Sundry Debtors’ (Sundry means ‘many’). Similarly, a list of names with the credit balances is prepared. This list is known as ‘Sundry Creditors’.

Limitations of Trial Balance:

Though the trial balance helps to ensure the arithmetical accuracy of the books of accounts, it is possible only when the accountant has not committed any error. As all the errors made are not disclosed by the trial balance, it would not be regarded as a conclusive proof of correctness of the books of accounts maintained.

Agreement of Trial Balance:

Agreement of Trial Balance means that both the debit and the credit entries have been posted correctly for each transaction. However, the agreement of trial balance is not a conclusive proof of arithmetical accuracy of accounting records. A tallied trial balance only proves that ledger posting is arithmetically correct. But it does not guarantee that the entry itself is correct. There can be errors, which may cause disagreement in the total of debits and credits, and there can be errors, which may not cause disagreement in the total of of debits and credits.

Some common errors include the following:

  1. Error committed in totaling the debit and credit balances in the trial balance.
  2. Error committed in totaling of the subsidiary books.
  3. Error committed in posting of the total of subsidiary books.
  4. Omission in showing an account balance in the trial balance.
  5. Error committed in calculating the ledger account balance.
  6. Error committed while posting a journal entry- posting made either with wrong amount or on the wrong side of the account or in the wrong account.
  7. Error committed in passing a journal entry of a transaction-making a reverse entry, i.e., account to be debited is credited and amount to be credited is debited, or an entry with wrong amount.
  8. Error committed in recording a transaction in subsidiary book-either with wrong name or wrong amount.
Preparation Of Trial Balance:

   As it is well known that a Trial Balance is prepared from the balances of Ledger Account. As such, a trial Balance can be prepared simply by identifying the nature of balances of Ledger Account; i.e. under which category the balance of an account falls into – Asset or Liability or Income or Expenditure.

Here it is to be noted that:

  1. Assets are normally recorded on the Debit side of the Trial Balance and
  2. Liabilities on the Credit side of the Trial Balance
  3. Incomes/Gains are recorded on the Credit side of the Trial Balance and
  4. Expenditures/Losses on the Debit side of the Trial Balance.
Ledger Account Balances:
  1. Any types of Expenses and Losses falls under Nominal Account (Debit Side) and such account normally shows Debit Balances
  2. Any amount or Bills Receivables falls under Real Account (Debit Side) and such account normally shows Debit Balances
  3. Any money or goods withdrawn from the business for personal use is treated as expenditure for the concern and falls under Nominal Account (Debit Side) and such account normally shows Debit Balances
  4. Any types of Incomes and Gains falls under Nominal Account (Credit Side) and such account normally shows Credit Balances
  5. Any types of Liability of the concern normally shows Credit Balance
  6. Reserves, Provisions, normally shows normally Credit Balance
  7. Capital of the concern normallyshows Credit Balance
  8. Any amount outstanding or Bills Payable is treated as liability of the concern and normally shows Credit Balance
  9. Any depreciation in assets are treated as indirect expenditure of the concern and falls under Nominal Account (Debit Side) and such account normally shows Debit Balance
  10. All Intangible Assets falls under Real Account (Debit Side) and such account normally shows Debit Balances
  11. Any amount paid in advance (pre-paid) falls under Real Account (Debit Side) and such account normally shows Debit Balances
  12. Any income or interest accrued falls under Real Account (Debit Side) and such account normally shows Debit Balances
Suspense Account:

As the name suggests, if any amount or transaction is unclassified, it is recorded in the suspense account temporarily unless properly classified. It is like a temporary waiting shed for unclassified funds unless a decision is made where to eventually record them permanently with clarity categorically.

If any error could not be located after taking all necessary steps, the amount of the difference in the trial balance is transferred to the suspense account and the trial balance is thus made to be tallied (pending the discovery and correction of the errors causing the difference). This is the only time an entry is made in the records without a corresponding entry elsewhere. Later when the error occurred will be located; they can be rectified through the suspense account. Eventually, the suspense account will be eliminated when the error will be located.

Prepare Trial Balance from the following ledger balances for the Year ended 31st March 1996:

  1. Sales 1,39,000.00
  2. Opening Stock 10,000.00
  3. Purchases 90,000.00
  4. Trade Expenses 3,000.00
  5. Light and Water 1,000.00
  6. Interest on Drawings 1,000.00
  7. Wages and Salaries 25,000.00
  8. Rent, Taxes and Insurance 3,000.00
  9. Interest Payable 1,500.00
  10. Prepaid Insurance 400.00
  11. Commission Paid 600.00
  12. Capital 60,000.00
  13. Furniture 10,000.00
  14. Commission Received 1,200.00
  15. Depreciation 2,000.00
  16. Land and Building 20,000.00
  17. Loss by Fire 4,000.00
  18. Insurance Claim Receivable 3,000.00
  19. Demurrage Paid 1,000.00
  20. Bad Debts 2,400.00
  21. Discount Allowed 1,080.00
  22. Accrued Interest 2,680.00
  23. Inventory in Hand 7,000.00
  24. Printing and Stationery 2,000.00
  25. Cash in Hand 1,600.00
  26. Bank Loan 28,500.00
  27. Petty Cash 200.00
  28. Reserve for Doubtful Debts 2,000.00
  29. Motor Vehicle 38,000.00
  30. Motor Vehicle Expenses 4,000.00
  31. Coal and Coke 1,000.00
  32. Sundry Expenses 20,000.00
  33. Bills Receivable 14,000.00
  34. Investment 20,000.00
  35. Fixtures and Fittings 5,000.00
  36. Patents and Patterns 5,000.00
  37. Drawings 2,500.00
  38. Trade Mark 5,000.00
  39. Reserve 24,000.00
  40. Bank Overdraft 10,000.00
  41. Outstanding Salaries 1,000.00
  42. Commission Received in Advance 200.00
  43. Bad Debts Recovered 800.00
  44. Sundry Creditors 12,000.00
  45. Bills Payable 10,000.00
  46. Return Outward 520.00
  47. Profits From Branch 14,000.00
  48. Subsidies Received 1,140.00
  49. TRIAL BALANCE OF --------------------------------
    Dr. Cr.
    Date Particulars L/F Amount Date Particulars L/F Amount
      Opening Stock


    Trade Expenses

    Light and Water

    Wages and Salaries

    Rent, Taxes and Insurance

    Prepaid Insurance

    Commission Paid



    Land and Building

    Loss by Fire

    Insurance Claim Receivable

    Demurrage Paid

    Bad Debts

    Discount Allowed

    Accured Interest

    Inventory in Hand

    Printing and Stationery

    Cash in Hand

    Petty Cash

    Motor Vehicle

    Motor Vehicle Expenses

    Coal and Coke

    Sundry Expenses

    Bills Receivable


    Fixtures and Fittings

    Patents and Patterns


    Trade Mark


































    Reserve for Doubtful Debts

    Bank Overdraft

    Outstanding Salaries

    Commission Received in Advance

    Bad Debts Recovered

    Sundry Creditors

    Bills Payable

    Bank Loan

    Return Outward

    Profits From Branch

    Subsidies Received

    Interest on Drawings

    Interest Payable

    Commission Received


















          304,460.00       304,460.00