Trial Balance:

Trial Balance is a list of all ledger accounts, sorted by Accounts IDs at a specific point of time e.g. final
balances on 31st Dec, 2023. Trial Balance follows the rule that:

Total sum of debit side = Total sum of credit side

Trial balance is used to verified that all dr. entries are equal to cr. entries. Suppose, if accountant
made a mistake while entering data in Ledger and omits or enter a duplicate value in ledger then
there will be some difference between debit and credit sides. Trial balance is used to prepare final
accounts.

Format of Ledger:
Business Name
Trial Balance
As on date 31st Dec, 2024
Account ID Account Dr. Cr.

Total

Illustration:
Following is list of some business transactions to understand the chain from journal entry to ledger
and then trial balance.

Transactions:
Jan. 1 Owner invested $1,000,000 to start a business.
Jan. 5 Furniture purchased on cash for $10,000.
Jan. 10 Inventory purchased on credit for $10,000 from vendor Interwood.
Jan. 12 Business paid $5,000 for its Payables A/c.
Jan. 15 Owner withdraws cash of $5,000.
Jan. 20 Owner withdrew some goods (inventory) of $100.
Feb. 1 Business paid cash $15,000 for salaries to its employees.
Feb. 10 Sales were made for $5,000 to a university NCBA&E, cash was not received.
Mar. 15 Customer paid $5,000 for credit sales.
March 20. Business Purchased inventory for $10,000 and received 10% discount.
March 25. Sales are made for $10,000 @ discount of 10%.
April 1. Customer purchased some goods in past that returned to business, of $1,000.
April 5. Business returned goods costing $500 that are found defective.

Journal Entries:

Jan. 1 Cash 1,000,000

Capital 1,000,000
 Jan. 5 Furniture 10,000
Cash 10,000
Jan. 10 Purchases 10,000
Interwood 10,000
Jan. 12 Interwood 5,000
Cash 5,000
Jan. 15 Drawings 5,000
Cash 5,000
Feb. 1 Salaries Expense 15,000
Cash 15,000
Feb. 12 NCBA&E 5,000
Sales 5,000
Mar. 15 Cash 5,000
Receivables A/c 5,000
Mar. 20 Purchases 9,000
Cash 9,000
Mar. 25 Discount Allowed 1,000
Cash 9,000
Sales 10,000
April 1 Sales Returns 1,000
Cash 1,000
Apr. 15 Cash 500
Purchases Returns 500

Now ledgers on basis of above given journal entries are prepared.

Cash
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Jan. 1 1,000,000 1,000,000
Jan. 5 (10,000) 990,000
Jan. 12 (5,000) 985,000
Jan. 15 (5,000) 980,000
Feb. 1 (15,000) 965,000
Mar. 15 5,000 970,000
Mar. 20 (9,000) 979,000
Mar. 25 9,000 970,000
April. 1 (1,000) 969,000
April. 15 500 969,500

Capital Mr. ABC

Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Jan. 1 (1,000,000) (1,000,000)
Furniture
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Jan. 5 10,000 10,000
 Purchases
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Jan. 10 10,000 10,000
Mar. 20 9,000 19,000

Interwood
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Jan. 10 (10,000) (10,000)
Mar. 12 5,000 (5,000)

Drawings
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Jan. 15 5,000 5,000

Salaries Expense
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Feb. 1 15,000 15,000

NCBAE&E
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Feb. 12 5,000 5,000
Mar. 15 5,000 0

Sales
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Feb. 12 (5,000) (5,000)
Mar. 25 (10,000) (15,000)

Discount Allowed
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
Mar. 25 1,000 1,000

Sales Returns
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
April 1 1,000 1,000
 Purchases Returns
Voucher Voucher
Date Description Dr. Cr. Balance
Number Type
April 15 500 500

Construction of Trial Balance:

Following steps are followed to prepare a trial balance on basis of final balances of ledgers:

1) Enter proper headings,

2) List down all head of accounts corresponding to their account ids,
3) Enter Dr. or Cr. balances against each head of account. Only final balances are transferred
from ledger to trial balance,
4) Both sides of trial balance should be equal.

Business Name
Trial Balance
As on date 31st Dec, 2024
Account ID Account Dr. Cr.
Cash 969,500
Capital: Mr. ABC 1,000,000
Purchases 19,000
Interwood 5,000
Drawings 5,000
Salaries Expense 15,000
Sales 5,000
Discount Allowed 1,000
Sales Return 1,000
Purchases Return 500
Total 0 2000