TRIAL BALANCE

Trail Balance is a statement that is prepared to know the arithmetical accuracy of books and accounts for
a certain period. It is the list of all the general ledgers accounts (both revenue and capital) maintained in
the organisations. These lists contain the name of all the ledger accounts. All the balances of these ledger
accounts will have either debit and credit balance. TB is prepared after the preparation of Journal
Vouchers, subsidiary books and Ledger accounts. Since double entry system has two sides, debit and
credit for equal amount, TB helps to know if total of these two sides are equal. Please note, TB is not an
account but statement.

As per R.N. Carter, “Trail Balance is the list of debit and credit balances, taken out from ledger, it also
includes the balances of cash and bank balances taken from cash book.”

Objectives:

a) Establishes Arithmetical accuracy

b) List the balances of all the general ledgers at glance.
c) Facilitates in location of error.
d) Facilitates on preparation of FS.
e) Helps in making adjustments: preparing FS with the help of adjustments which was missed out in
final extracted TB.

Importance/advantages/merits:

a) Summarizes the Financial Transactions.

b) Ascertain arithmetical accuracy.
c) Rectification of error before preparing FS.
d) Assists in rectification of errors.
e) Assists in preparation of audit reports
f) Assists in decision Making – compares ledgers of this year with another year.

Types of Trial Balance:

a) Unadjusted TB: TB without year-end adjustments entries

b) Adjusted TB: TB will all the entries of the particular accounting year. (includes adjusted entries).
c) Post-closing TB: Prepared after closing the accounting year and before beginning of new
accounting period.

Errors that can be disclosed by Trial Balance:

a) Wrong totaling of subsidiary books:

If the total of any subsidiary book is wrongly cast, it would cause a disagreement in the Trial
Balance. For instance, Purchase book has been under cast by Rs 1000. From the Purchase book,
all the personal accounts have been credited correctly but mistake occurred only in Purchase
 Account, to the extent of Rs 1000 (Less). Thus, the Trial Balance disagrees to the extent of Rs 1000;
debit side falls short of the amount.

b) Postings of wrong amount:

If wrong amount is posted in one of the accounts, then TB doesn’t disagree. For instances, salary
paid from cheque Rs. 7500/- is wrongly credited to Bank account by Rs. 75000/-. Correct entry
was made in the Salary account. Thus in this case TB shows difference of Rs. 75000-7500 =
67,500/-.

c) Posting of amount on wrong side:

If any entry is made in the wrong side of the ledger account, then TB doesn’t disagree. Credit sales
made to a customer for Rs. 500 has been credited to the customer account, instead of debit. As a
result of this error, the credit side of the Trial Balance will exceed by Rs. 1,000 (double the amount
of the error) because there are two credits one in Sales Account and another in Personal Account
and no debit for the transaction.

d) Posting twice in one ledger:

If any transactions is entered once in one ledger and twice in its corresponding ledger, TB doesn’t
agree. In this case TB differ to the extent of duplication made in the ledger. For example, if wages
paid Rs. 500/- is recorded once in cash account and twice in wages account it will over-state wages
account by Rs. 500/-. However, cash account is not affected.

e)