Format of Trial Balance

Updated on January 2, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What is the Trial Balance Format?

Trial Balance has a tabular format that shows details of all ledger balances in one place. It includes transactions done during the year and the opening and closing balances of ledgers, as every entity needs to evaluate its financial position over a particular period. The trial balance shows the list of all the accounts with both debit and credit balances in one place and helps analyze the position and transactions entered into during such a period.

Generally, the trial balance format has three columns. First columns or particulars describe the ledger accountDescribe The Ledger AccountLedger in accounting records and processes a firm’s financial data, taken from journal entries. This becomes an important financial record for future reference. It is used for creating financial statements. It is also known as the second book of entry.read more as the name or head under which such ledger is created. Then there are AMOUNTS (DEBIT), i.e., the ledgers that have debit balances; generally, an entity’s assets are shown under this column. The last is AMOUNT (CREDIT), i.e., those ledgers with credit balances such as share capitalShare CapitalShare capital refers to the funds raised by an organization by issuing the company's initial public offerings, common shares or preference stocks to the public. It appears as the owner's or shareholders' equity on the corporate balance sheet's liability side.read more, reserves and surplusesReserves And SurplusesReserves and Surplus is the amount kept aside from the profits that are to be used either for the business or for the shareholders to pay out dividends. Reserves and surplus is reflected under shareholders funds in the balance sheet.read more, current and non-current liabilities, etc.

To illustrate the above text; a derived table is as follows:

ParticularsAmount (Dr)Amount (Cr)

Explanation of Trial Balance

The Trial BalanceTrial BalanceTrial Balance is the report of accounting in which ending balances of a different general ledger are presented into the debit/credit column as per their balances where debit amounts are listed on the debit column, and credit amounts are listed on the credit column. The total of both should be equal.read more can be prepared by using the following steps:

  1. Make ledger posting of all the journal entries.

  2. Re-verify whether any transaction is omitted or if all the balances are prepared correctly or not?

  3. After that, the final step is to arrange the closing balances of all the ledger accounts in the debit and credit array at one place called Trial Balance.

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Purpose

The primary purpose of preparing the trial balance format in excel is to reconcile all the ledger balances to make the financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more at the end of a particular period, submitted or prepared as per the legal regulations. In simple words, it can be said that the fundamental first step is to pass journal entries. After that, those journal entries passed would be posted to respective ledgers called ledger posting. After that, only the correct closing balances of all the ledgers could be seen from the Trial Balance. Sometimes, governing law mandates the preparation of Trial Balance, so for satisfying that purpose also, some entities prepare the trial balance.

Trial Balance Format

The trial balance in excel is as follows:

Format of trial balance 2

As per the above-drawn trial balance, all the assets have a debit balanceDebit BalanceIn a General Ledger, when the total credit entries are less than the total number of debit entries, it refers to a debit balance. A debit balance is a net amount often calculated as debit minus credit in the General Ledger after recording every transaction.read more. All the liabilities have a credit balanceCredit BalanceCredit Balance is the capital amount that a company owes to its customers & it is reflected on the right side of the General Ledger Account. Usually, Liability accounts, Revenue accounts, Equity Accounts, Contra-Expense & Contra-Asset accounts tend to have the credit balance. read more except the balances of Bank overdraftOverdraftOverdraft is a banking facility that offers short-term credit to the account holders by allowing them to withdraw money from their savings or current account even if their account balance is or below zero. Its authorized limit differs from customer to customer.read more, which have a credit balance but are shown on the debit side. As shown above, the salary payableSalary PayableSalary payable refers to the liability of the company towards its employees against the amount of salary of a period that became due but has not been paid yet to them by the company and it is shown in the balance of the company under the head liability.read more and rent payable are shown on the credit side. These are the liabilities of the business to be paid shortly and hence shown as a credit balance. The main thing to focus on is that the total balance of the credit and debit sides of the trial balance would always match if all the postings were made correctly.

Examples of Trial Balance Format

Example #1

Prepare the trial balance of ABC Inc. from the available balances as on date 31.03.2019, which as follows:

ParticularsAmount
Business Loans & Advances$500,000
Reserve & Surplus$2,250,000
Profit & Loss Balance$112,000
Goodwill$1,000,000
Trade Receivables$62,500
Telephone Charges$50,000
Tangible Assets$1,250,000
Investments$500,000

Now, the trial balance of ABC Inc. as of 31.03.2019 is as follows:

Format of trial balance Example 1.1

The main thing to notice here is the total debit and credit side of the trial balance is equal.

Example #2

Prepare the trial balance of an NBFC having the following ledger balances as of date 31.03.2019, which are as follows:

ParticularsAmount
Loans$50,000,000
Salary Paid$1,250,000
Profit & Loss Balance$2,512,000
Provision for Bad Debts$4,000,000
Installments Receivables$47,262,500

Now, the trial balance of NBFC as of 31.03.2019 is as follows:

Format of trial balance Example 2.1

Conclusion

Trial balance is an essential tool for any business concern to reconcile whether the books of accounts are correctly maintained or not. The ledger balances, i.e., all expenses, incomes, receipts, payments, assets, liabilities, share premiumsShare PremiumsShare premium is the difference between the issue price and the par value of the stock and is also known as securities premium. The shares are said to be issued at a premium when the issue price of the share is greater than its face value or par value. This premium is then credited to the share premium account of the company.read more, etc. are to be reported in the trial balance. The debit balance of the profit and loss accountProfit And Loss AccountThe Profit & Loss account, also known as the Income statement, is a financial statement that summarizes an organization's revenue and costs incurred during the financial period and is indicative of the company's financial performance by showing whether the company made a profit or incurred losses during that period.read more 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 is correctly prepared. Otherwise, the final result can say the financial statements prepared do not show us the accurate picture or results of the business operationsBusiness OperationsBusiness operations refer to all those activities that the employees undertake within an organizational setup daily to produce goods and services for accomplishing the company's goals like profit generation.read more.

Finally, a person who has a good knowledge of accounting and has relevant experience in such a field should be assigned the responsibility to prepare the trial balances of the entity for the selected period, followed by the preparation of financial statements.

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