Trial Balance format definition and methods

Trial Balance format definition and methods

Trial balance?

Trial balance is a statement prepared to check the arithmetical accuracy of the books of ledger accounts.

Trial Balance is the list of debit and credit balances taken out from ledger to test the arithmetical accuracy of the books. “It also includes the balances of Cash and bank taken from the Cash Book”. Trial Balance format is also shown in this article.

First step recording of transactions in a journal. The next step post them into the ledger and the next step in the accounting process is to prepare a statement to check the arithmetical accuracy of the transactions recorded so for. This statement is called ‘Trial Balance’.

Trial balance is a statement that shows debit balances and credit balances of all accounts in the ledger. Since every debit should have a corresponding credit as per the rules of the double-entry system, the total of the debit balances and credit balances should tally (agree). In case, there is a difference, one has to check the correctness of the balances brought forward from the respective accounts. Trial balance can be prepared on any date provided accounts are balanced.

 Definition

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.

Also Read: 20 transactions with their Journal Entries, Ledger, and Trial balance

Features of  Trial Balance

  1. Trial balance is a list of the various ledger account balances whether debit or credit.
  2. It is prepared in the form of a statement.
  3. A firm prepares a trial balance in order to check the arithmetical accuracy of the ledger accounts.
  4. The arithmetical accuracy established by a trial balance is not proof that there are no mistakes in the books of accounts.
  5. A trial balance is usually prepared at the end of the accounting year. However, a firm may prepare it  weekly, monthly, quarterly or half-yearly also.
  6. Trial balance does not form a part of the final accounts.
  7. It provides a summary of the ledger accounts. Thus, it serves as a link between the books of accounts and Trading & Profit and Loss A/c and Balance Sheet.

 Objectives

  1. To check the arithmetical accuracy of the ledger accounts.
  2. To locate the errors.
  3. To facilitate the preparation of final accounts.
  4. Trial balance Provides the summary of Ledger Accounts.

 Advantages

  1. Trial balance helps to ascertain the arithmetical accuracy of the book-keeping work done during the period.
  2. It supplies in one place ready reference of all the balances of the ledger accounts.
  3. If any error is found out by preparing a trial balance, the same can be rectified before preparing final accounts.
  4. It is the basis on which final accounts are prepared.

Limitations 0f 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 conclusive proof of the correctness of the books of accounts maintained.

Errors don’t Affect Trial Balance

(1) Errors of complete commission.

(2) Wrong recording in the books of original entry.

(3) Complete ommission from posting.

(4) Errors of posting to the wrong Account but on the correct side.

(5) Compensating errors.

(6) Errors of principles.

Errors Affecting Trial Balance

  1. Error in totaling of subsidiary books as undercast or overcast.
  2. Error in the balancing of ledger accounts.
  3. Error in posting to the correct Account but wrong amount.
  4. The error of partial omission.

Also Read: Meaning and advantages of Double Entry System

  Methods Of Trial BalanceA trial balance can be prepared in the following methods-

The Total Method or Gross trial balance Method :
This is a very simple method of preparing a trial balance. According to this method, the total amount of the debit side of the ledger accounts are shown on the debit side of the Trial Balance and the total amount of the credit side of the ledger accounts are shown on the credit side of the Trial Balance. After this, the debit and credit column of the trial balance is totaled. If they are equal it is assumed that there is no arithmetical error in the posting of Ledger Accounts.

EXAMPLE 1. Trial Balance format 

TRIAL BALANCE FORMAT

(Total Method)

As on  31st  March, 2020

      Name Of Accounts L.F. Debit Total

(Amount)

Credit Total

(Amount)

 

Cash Account

Machinery Account

Building Account

Capital Account

Purchase Account

Sales Account

Goodwill Account

Purchase Return Account

Sales Return Account

Depreciation Account

Wages Account

Salaries Account

Selling and distribution Account

Carriage inward Account

Drawing Account

Repairs Account

Rent Account

General Reserve Account

Debtors Account

Creditors Account

Bank Account

 

 

8,50,000

10,00,000

15,00,000

…………

16,00,000

…………

1,00,000

………….

50,000

1,00,000

20,000

50,000

1,25,000

25,000

50,000

12,000

18,000

…………

5,20,000

80,000

4,75,000

 

 

3,50,000

2,00,000

………..

20,10,000

30,000

26,00,000

…………

75,000

…………

…………

…………

…………

…………

…………

…………

…………

…………

3,00,000

1,20,000

4,80,000

4,10,000

 

                                   TOTAL 65,75,000 65,75,000

trial balance format

The Balance Method Net trial 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.

Also Read: Bank Reconciliation Statement 

preparation: Steps (Only Balance Method)

  1. Date on which the trial balance is prepared should be mentioned at the top.
  2. Name of the Account column contains the list of all ledger accounts.
  3. Ledger folio of the respective account is entered in the next column.
  4. Ledger Accounts which shows a debit balance is put on the Debit side of the trial balance.
  5. Ledger Accounts that Showing credit balance is put on the Credit side of the Trial Balance.
  6. Accounts which show no balance i.e. whose Debit and Credit totals are equal are not entered in Trial Balance.
  7. There is always debit balance of the purchase account, sales return account and opening stock account.
  8. There is always a credit balance for the sales account, purchase return account etc.
  9. All assets such as cash, Machine, furniture, building, Goodwill, Bills receivable, Debtors, prepaid expenses, Fixtures and fittings, Motor Vehicles, bank, Computer, Accrued income, etc. are always debit balance.
  10. All Liabilities such as capital, creditors, Bills Payable, Outstanding expenses, loans, mortgage loans, bank overdraft, advance income etc. are always have credit balance.
  11. All expenses and losses such as wages, salaries, Trade expenses, general expenses, interest paid, commission paid, discount allowed, rent paid, interest on capital, interest on loan, Depreciation, Bad Debts and all types of direct and indirect expenses are always have debit balance.
  12. All types of income such as rent received, interest received, commission received, discount received, interest on Investment, Dividend Received etc. are always have credit balance.
  13. There is always credit balance of accounts like capital reserve, general reserve, Investment fluctuation Reserve, Tax Reserve, Capital Redemption reserve, Debenture redemption reserve, securities Premium Reserve etc.
  14. Then the two sides of the Trial Balance are totalled. If they are equal it is assumed that there is no arithmetical error in the posting and balancing of Ledger Accounts.

EXAMPLE 2. Trial Balance format 

TRIAL BALANCE FORMAT

(Balance Method)

As on  31st  March, 2020

      Name Of Accounts L.F. Debit Balance

(Amount)

Credit Balance

(Amount)

 

Cash Account

Machinery Account

Building Account

Capital Account

Purchase Account

Sales Account

Goodwill Account

Purchase Return Account

Sales Return Account

Depreciation Account

Wages Account

Salaries Account

Selling and distribution Account

Carriage inward Account

Drawing Account

Repairs Account

Rent Account

General Reserve Account

Debtors Account

Creditors Account

Bank Account

 

 

5,00,000

8,00,000

15,00,000

………….

15,70,000

………….

1,00,000

…………

50,000

1,00,000

20,000

50,000

1,25,000

25,000

50,000

12,000

18,000

…………

4,00,000

…………

65,000

 

 

………….

………….

 

20,10,000

………….

26,00,000

…………

75,000

…………

…………

…………

…………

…………

…………

…………

…………

…………

3,00,000

……….

4,00,000

……….

 

                                   TOTAL 53,85,000 53,85,000

This is the exact trial Balance format that should be used

trial balance format
trial balance format

ALSO READ : TRIAL BALACE – तलपट- ट्रायल बैलेंस- परीक्षा सूची – शेष परीक्षण

 

JK Bhardwaj

Bhardwaj Accounting Academy

Trial Balance Format

 

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