In view of the coronavirus pandemic, we are making LIVE CLASSES and VIDEO CLASSES completely FREE to prevent interruption in studies
Principles and Practice of Accounting > Trial Balance > Preparation of Trial Balance
Trial Balance

Preparation of Trial Balance

The first step in the preparation of final accounts is the preparation of trial balance. So it is absolutely essential that we prepare the trial balance perfectly, so our final accounts do not contain any errors. Let us learn more about the methods and procedures of preparation of trial balance.

Browse more Topics Under Trial Balance

Trial Balance

A trial balance is a bookkeeping worksheet-like account that reflects all the credit and debit balances of all the ledger accounts. Once we prepare this statement, we can prepare the final accounts of the company on the basis of this trial balance.

One other important use of the trial balance is that it can determine the arithmetic accuracy of the accounts. So if both columns of the trial balance tally, we can be reasonably assured of the accuracy of the accounts. It does not ensure that the accounts are free of all errors but it can at least establish mathematical accuracy.

Preparation of Trial Balance

Preparation of Trial Balance

Preparation of trial balance is the third step in the accounting process. First, we record the transactions in the journal. And then we post them in the general ledger. Then we prepare a trial balance to verify that the debit totals equal to the credit totals. Let us take a look at the steps in the preparation of trial balance.

Learn more aboutĀ Objectives and Limitations of Trial Balance here

  1. To prepare a trial balance we need the closing balances of all the ledger accounts and the cash book as well as the bank book. So firstly every ledger account must be balanced. Balancing is the difference between the sum of all the debit entries and the sum of all the credit entries.
  2. Then prepare a three column worksheet. One column for the account name and the corresponding columns for debit and credit balances.
  3. Fill out the account name and the balance of such account in the appropriate debit or credit column
  4. Then we total both the debit column and the credit column. Ideally, in a balanced error-free Trial balance these totals should be the same
  5. Once you compare the totals and the totals are same you close the trial balance. If there is a difference we try and find and rectify errors. Here are some cases that cause errors in the trial balance
  • A mistake in transferring the balances to the trial balance
  • Error in balancing an account
  • The wrong amount posted in the ledger
  • Made the entry in the wrong column, debit instead of credit or vice versa
  • Mistake made in the casting of the journal or subsidiary book

Rules for Preparation of Trial Balance

While preparation of trial balances we must take care of the following rules/points

1] The balances of the following accounts are always found on the debit column of the trial balance

  • Assets
  • Expense Accounts
  • Drawings Account
  • Cash Balance
  • Bank Balance
  • Any losses

2] And the following balances are placed on the credit column of the trial balance

Solved Question onĀ Preparation of Trial Balance

Q: What are the two methods of preparing the trial balance?

Ans: There are broadly two methods for the Preparation of Trial Balance. They are

  1. Total Method: Here the totals of the credit and debit columns of the ledger accounts are transferred to the Trial Balance. The closing balance is of no concern
  2. Balance Method: Here only the closing balance is transferred to the Trial Balance on the relevant credit or debit column.
Share with friends

Customize your course in 30 seconds

Which class are you in?
5th
6th
7th
8th
9th
10th
11th
12th
Get ready for all-new Live Classes!
Now learn Live with India's best teachers. Join courses with the best schedule and enjoy fun and interactive classes.
tutor
tutor
Ashhar Firdausi
IIT Roorkee
Biology
tutor
tutor
Dr. Nazma Shaik
VTU
Chemistry
tutor
tutor
Gaurav Tiwari
APJAKTU
Physics
Get Started

Leave a Reply

avatar
  Subscribe  
Notify of

Stuck with a

Question Mark?

Have a doubt at 3 am? Our experts are available 24x7. Connect with a tutor instantly and get your concepts cleared in less than 3 steps.
toppr Code

chance to win a

study tour
to ISRO

Download the App

Watch lectures, practise questions and take tests on the go.

Get Question Papers of Last 10 Years

Which class are you in?
No thanks.