What is Trial Balance?
Trial Balance may be defined as a statement that contains balances of all ledger accounts on a particular date. In order to verify the accuracy of the ledger a/c, we prepare a trial balance. The trial balance is an internal document that lists any account in the general ledger which has a balance. Trial Balance consists of a debit column with all debit balances of accounts and a credit column with all credit balances of accounts.
If an account has a debit balance, the balance is entered in the column that is headed “debit.” If an account has a credit balance, the balance is entered in the column that is headed “credit. “Therefore, the total of the debit column should be equal to the total of the credit column. If the totals are identical, we say that the trial balance is “in balance.”
The totals of these columns if tally’s, it is presumed that the ledger has been maintained correctly. However, Trial Balance proves only the arithmetical accuracy of posting in the ledger.
Why Trial Balance is prepared?
The traditional method of bookkeeping was done manually and there was a chance of errors in writing, posting, and tabulating amounts and balances. Hence, the trial balance was routinely prepared in order to detect and correct the incorrect account balances. However, today’s software is coded to prevent such errors from occurring. As a result, we get an accurate result.
Note: Even if the Trial Balance tally (i.e., debit balance equals credit balance), we cannot say Ledger is error-free or accurate.
Example: If there is an error of omission i.e., if any transaction is completely omitted, the total of 2 columns still be equal.
Similarly, if entry is recorded twice, we get equal totals.
Format of Trial Balance
| TRIAL BALANCE | |||
|---|---|---|---|
| Hari Enterprises as on March 31st, 2021 | |||
| Sl. No. | Particulars | Debit (Rs.) | Credit (Rs.) |
| 1. | Cash in Hand | 10000 | |
| 2. | Drawings | 22000 | |
| 3. | Sundry Debtors | 30000 | |
| 4. | Office Rent | 2000 | |
| 5. | Sales | 4000 | |
| 6. | Bank Loan | 6000 | |
| 7. | Purchases | 3000 | |
| 8. | Prepaid Rent | 4000 | |
| 9. | Outstanding Salaries | 8000 | |
| 10. | Accounts Payables | 2000 | |
| 11. | Equipment's | 9000 | |
| Total | 50,000 | 50,000 | |
