What is Trial Balance in Accounting
A trial balance is a bookkeeping worksheet that compiles the balances of all ledgers into equivalent debit and credit account column totals. A trial balance is prepared on a regular basis, normally at the conclusion of reporting cycle. A trial balance is created to ensure that the entries in a company’s bookkeeping procedure are mathematically accurate.
How Does a Trial Balance Work?
The trial balance in a double-entry account book is a statement of both debits and credits.
Since each transaction is listed in such a manner that the debits match the credits, the general ledger and trial balance should be of high quality. If the total of the debits does not equal the total of the credits, a mistake has arisen and must be identified.
Businesses prepare a trial balance on a daily basis, often at the conclusion of a reporting cycle, to guarantee that the entries in the books of accounts are mathematically accurate.
It’s also worth noting that just because the trial balance is balanced doesn’t mean there aren’t any accounting mistakes. The accountant, for example, may have forgotten to register an account or classified a transaction inappropriately. There are financial mistakes that will not be visible in the trial balance.
What is included in a Trial Balance?
A trial balance lists all general ledger account totals. Each account should have an account number, a description, and a final debit/credit balance. It should also have the end date of the accounting period for which the report is being created.
Difference Between Trial Balance and General Ledger
The key distinction between the trial balance and the general ledger is that the general ledger lists all transactions by account, while the trial balance only shows the account totals, not each individual transaction.
If any adjusting entries were created, they must be reflected on the trial balance. It should display the figures before the adjustment, the adjusting entry, and the balances after the adjustment in this case.
Methods of Preparing Trial Balance
Following are the methods of preparing trial balance:
The sum of the debit side is put in the trial balance’s debit column, and the total of the credit side is placed in the credit column. The totals in the debit and credit columns should be the same.
Only the balances of all ledger accounts are seen in the trial balance by using the balance method.
Format of Trial Balance
Trial Balance on March 31, 2021
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