Meaning of Trial Balance in Accounting
As per the accounting cycle, preparing a trial balance is the next step after posting and balancing ledger accounts. It is a statement of debit and credit balances that are extracted on a specific date.
It is made as an attempt to prove that the total of ledger accounts with a debit balance is equal to the total of ledger accounts with the credit balance. As the name suggests, it is an actual “trial” of the debit and credit balances, they should be equal.
A journal and a ledger are maintained according to the double-entry concept of accounting. In a trial balance, the sum of debits and credits must match.
Related Topic – What is a Debit Balance & Credit Balance?
Sample Format of Trial Balance with PDF
The suffix “Account” or “A/c” may or may not be written after the account names.
Related Topic – What is an Adjusted Trial Balance?
Use of Trial Balance
- It acts as a base to create the final accounts of a business such as an Income statement, a Trading A/C, and a Balance Sheet.
- To prepare a trial balance it is important to ensure the arithmetic conceptual accuracy. Due to the dual aspect of accounting, the sum of total credits should be equal to the sum of total debits.
- Due to its accuracy, tallied Trial Balances offer significant peace of mind regarding the accuracy of ledger balances.
- It acts as a summarized form of all ledger balances, in case the debit and credit balances do not match then it is concluded that there is some error and the difference is temporarily transferred to a “Suspense A/C” and corrected afterwards.
- Auditors may decide to use it and transfer the account balances onto their auditing software. They can then perform various different kinds of inspections.
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