What is Trial Balance Format?
Trial Balance has a tabular format which shows details of all ledgers balances at one place which includes transactions done during the year as well along with the opening and closing balances of ledgers, as every entity needs to evaluate its financial position over a particular span of time let say one month the trial balance shows the list of all the accounts with both debit as well as credit balance at one place and helps in analyzing the position and transactions entered into during such time period at one place.
Generally trial balance format has 3 columns which are defined as one for PARTICULARS i.e. the description of ledger account such as name or head under which such ledger was being created, one is for AMOUNTS (DEBIT) i.e. the ledgers which have debit balances generally assets of an entity are shown under this column and the last is for AMOUNT (CREDIT) i.e. those ledgers which have credit balances such as share capital, reserves and surpluses, current and non-current liabilities, etc.
To illustrate the above text a derived table is as follows:
Explanation of Trial Balance
The Trial Balance can be prepared by using the following steps:
Step 1: Make ledger posting of all the journal entries.
Step 2: Re-verify whether any transaction is omitted or all the balances are prepared correctly or not?
Step 3: Thereafter the final step is to arrange the closing balances of all the ledger accounts in debit and credit array at one place called Trial Balance.
The main purpose to prepare the trial balance format in excel is to reconcile all the ledger balances with the objective to prepare the financial statements of the entity at the end of particular period of time to be submitted or prepared as per the legal regulations, in simple words it can be said that the basic first step is to pass journal entries thereafter those journal entries passed would be posted to respective ledgers called as ledger posting and thereafter only the correct closing balances of all the ledgers could be seen from the Trial Balance. Sometimes, the preparation of Trial Balance is mandated by the governing law, so for satisfying that purpose also some entities shall have to prepare the trial balance.
Trial Balance Format
The trial balance in excel is as follows:
It could be seen from the above-drawn trial balance that all the assets have debit balance and all the liabilities have credit balance except the balances of Bank overdraft which have credit balance but shown on debit side and it can be seen from the above example that the salary payable and rent payable are shown on credit side as at present these are the liabilities of the business which are to be paid in near future and hence shown as credit balance. The main thing to focus on is that the total balance of the credit side and debit side of trial balance would always match if all the postings are made correctly.
Examples of Trial Balance Format
Prepare the trial balance of ABC Inc. from the available balances as on date 31.03.2019 which as follows:
Now, the trial balance of ABC Inc. as on 31.03.2019 is as follows:
The main thing to notice here is the total of debit and credit side of the trial balance is equal.
Prepare the trial balance of an NBFC having following ledger balances as on date 31.03.2019 which as follows:
Now, the trial balance of NBFC as on 31.03.2019 is as follows:
Trial balance is an important tool for any business concern to reconcile whether the books of accounts are maintained properly or not. The ledger balances i.e. of all expenses, incomes, receipts, payments, assets, liabilities, share premiums, etc. are to be reported in the trial balance. The debit balance of profit and loss account is to be shown on the credit side of the trial balance by mentioning a negative sign in the amount column.
While preparing the ledgers and trial balances one must be very alert to check whether each ledger has been correctly prepared or not otherwise the final result or can say the financial statements prepared do not show us the accurate picture or results of the business operations.
Finally, a person who has a good knowledge of accounting and has relevant experiences in such a field should be assigned responsibility to prepare the trial balances of the entity for the selected period of time followed by the preparation of financial statements.
This has been a guide to Format of Trial Balance. Here we discuss examples of trial balance in excel and its purpose with detail explanation. You can learn more about financing from the following articles –