Accounting trial balance (TB) is a compilation of all the general ledger accounts along with the account balances at any point in time. Trial balance is usually presented in a tabular form enlisting all the accounts and their respective balances at the end of an accounting period as debit or credit balances.
The balance extracted for any single account is the net of all the debit and credit entries in that account.
If double entries have been posted correctly, then the total of all debit entries made to all the accounts in the general ledger must equal the total of all the credit entries. It follows that if balances are extracted for every account in the general ledger, the sum of the debit balances must equal the sum of the credit balances.
Types of trial balance
If you recall the accounting cycle, trial balance is prepared at three different stages of the accounting cycle. Accordingly, we can say that there are three types of trial balance based on the stage of accounting cycle at which the trial balance is prepared or extracted from the accounting system.
- Unadjusted trial balance – TB before adjusting entries are posted
- Adjusted trial balance – TB after adjusting entries are posted
- Post-closing trial balance – TB after closing entries are posted
All these types of trial balances are further explained in the next two chapters.
The purpose of a trial balance
A trial balance has two main purposes.
- It is a starting point for producing the financial statements at the end of an accounting period.
- It is a useful means of checking for errors in the accounting system. Errors must have occurred if the total of debit balances and total of credit balances in the trial balance are not equal.
Format of trial balance
The normal method of presentation is to present the balances in two columns, one for debit balances and one for credit balances.
- Debit balances are assets, expenses, or drawings.
- Credit balances are liabilities, income, or equity (capital including share capital and reserve accounts in the case of a company).
Example – Trial balance as at 31 December 20xx
| Particulars | Dr. ($) | Cr. ($) | Which element? | |
| Bank | 15,000 | Asset | ||
| Capital | 30,000 | Equity | ||
| Loan | 30,000 | Liability | ||
| Van | 40,000 | Asset | ||
| Stall | 5,000 | Asset | ||
| Material cost | 18,500 | Expense | ||
| Accounts payable | 4,500 | Liability | ||
| Accounts receivable | 1,000 | Asset | ||
| Sales | 21,000 | Income | ||
| Drawings | 6,000 | Equity | ||
| Total | 85,500 | 85,500 | ||
