Joomla TemplatesBest Web HostingBest Joomla Hosting
Home Trial Balance

Articles

Trial Balance

A trial balance is a list of the closing debit and credit balances of all the accounts in the general ledger. It may be prepared at anytime but usually at the end of an accounting period. All the debit balances of the accounts are listed in the debit column of the trial balance and all the credit balances are listed in the credit column. The total of the debit column must equal the total of the credit column.

If they are not equal, it means one or more errors have been made in the general ledger accounts. The errors must be found and corrected before the profit and loss statement, and balance sheet can be prepared. Even if the debit and credit columns have the same total, it is no guarantee that the accounts are free from errors. The trial balance is not affected by the following errors which are the most common.

  • A wrong amount is posted to the debit and credit sides. For example, if $121 instead of $112 is posted to the debit side of telephone account, and the same wrong amount of $121 is posted to the cash account. The trial balance will still balance.
  • An entry made wrongly on the debit side instead of the credit side of an account, and vice versa. For example, a discount of $50 allowed to a customer is posted to the debit side of the customer’s account and credited to discount account.
  • And entry debited or credited correctly but to the wrong account. For example, rent payment is posted to the general expenses account instead of the rent account.
  • A transaction is not posted at all to the general ledger will not be shown on the trial balance. Neither will it affect the debit and credit balances in the trial balance.
  • A transaction is posted correctly but twice to the accounts. The debit total and the credit total will still equal each other.

The trial balance is an effective method to correct accounting errors. It verifies that all postings to the accounts have been done correctly as the total of all debit balances must equal the total of all credit balances. The trial balance is used to prepare the profit and loss statement, balance sheet and other financial reports.

The trial balance above shows the debit (Dr) total equals the credit (Cr) total. This has to be as in the double entry system of bookkeeping, whenever a transaction takes place two entries are made to two different accounts

Items that appear on a trial balance:

Debit Credit
$ $
Land XXX
Building XXX
Machinery XXX
Equipment XXX
Fixtures and fittings XXX
Vehicles XXX
Trade debtors XXX
Trade creditors XXX
Inventory/stock XXX
Sales XXX
Purchases XXX
Telephone expense XXX
Lighting and heating XXX
Office salaries XXX
Printing and stationery XXX
Rent XXX
Interest payable XXX
Wages XXX
Bad debts XXX
Depreciation XXX
Discounts allowed XXX
Discounts received XXX
Loss on sale of assets XXX
Gain on sale of assets XXX
Fees earned XXX
Interest revenues XXX
Bank XXX
Cash XXX
Loan XXX
Drawings XXX
Retained earnings XXX
Capital XXX
100,000 100,000

Last Updated (Friday, 03 September 2010 17:57)