General Ledger vs Trial Balance

Difference Between General Ledger and Trial Balance

The primary difference between general ledger and trial balance is that general ledger prepared by the company is the set of the different master accounts in which the detailed transactions of the business are present having all the accounts, whereas, the trial balance of the company has only the ending balance present in those accounts of the company.

Preparation of general ledger and trial balance are two primary actions in the accounting cycle. The critical difference is that general ledger is a set of accounts that contain detailed transactions conducted. At the same time, the trial balance is a statement that records the general ledger ending balances.

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Source: General Ledger vs Trial Balance (wallstreetmojo.com)

A general ledger is the principal set of accounts and primary accounting records of a company. The ledger provides a complete record of accounting transactionsAccounting Transactions Accounting Transactions are business activities which have a direct monetary effect on the finances of a Company. For example, Apple representing nearly $200 billion in cash & cash equivalents in its balance sheet is an accounting transaction. read more conducted within a financial year. The information in general ledgers is collected from journals, which is the primary book of accounts. It includes debit and credit entries of transactions. It is generally separated as a different asset class like owners’ equity, assets, liabilities, revenues, and expenses. All the amounts related to the respective business are posted from the journal. The ledger may be prepared for any time frame as and when required by the Organization, be it a Fiscal year or Calendar year.
A trial balance is a statement that shows the total balance amounts of all the ledger accountsLedger Accounts Ledger in Accounting, also called the Second Book of Entry, is a book that summarizes all the journal entries in the form of debits & credits to use for future reference & create financial statements. read more for the specific period, i.e., for a month, quarter, semi-annually, annually. In other words, taking ledger balanceLedger Balance A ledger balance is an opening balance that remains available during the start of each business day. It comprises of all the deposits and withdrawals, used in the calculation of the total funds left in an account at the end of the previous day.read more and presenting them in a single worksheet as on a particular date is Trial Balance. It gives a quick overview of the balances of different heads of accounts.

General Ledger vs. Trial Balance Infographics

Example of General Ledger

Example of Trial Balance

Suppose we have the following information on XYZ Ltd.

Solution: We need to put respective balances in a suitable debit or credit head.

Flow chart showing the different financial transaction in an organization and steps where general ledger and Trial balance come into the picture:

Key Differences

The key differences are as follows –

Amount & nature of information: The general ledgerGeneral Ledger A general ledger is a book of accounts that records the everyday business transactions in separate ledger accounts. The entries made in a ledger can be verified by getting a NIL balance on summing up all the ledger account amounts in the trial balance.read more contains all accounts of an organization with its transactions. It is basically a database of information. Whereas the trial balance only provides the ending balance of each of those accounts. It’s a derivation of a ledger.
Level of Summary: The general ledger may have a hundred pages as per the volume of transactions. In contrast, the trial balance has only a few pages that have an ending balance of general ledger.
Usage: For accountants, general ledger serves as the primary source of information while examining books of accounts. On the other hand, the trial balance is used to measure the mathematical accuracy of all debits and credits as the totals of both should be equal to verify that the books are in balance. At the end audit of the organization, the auditorsAuditors An auditor is a professional appointed by an enterprise for an independent analysis of their accounting records and financial statements. An auditor issues a report about the accuracy and reliability of financial statements based on the country's local operating laws.read more have final balances for all accounts available in trial balance so that they can do their job more efficiently. They use the general ledger to trace balances back to individual transactions of each head.
Account classification: Posting in the general ledger is done according to the class of accounts, but there is no such classification of accounts in the trial balance.
Time Period: General Ledger records transactions during the accounting year of the organization for any period, whereas trial balance is generally prepared on the final day of the accounting year.
For investor use: Trial Balance is widely used by an investor for a study if they want to put money in shares of the company. General Ledger is not available for such use.

General Ledger vs. Trial Balance Comparative Table

Basis	General Ledger	Trial Balance
Meaning	A general ledger is defined as a book of accounts.	A trial balance is a listing of the accounts and balances of each of the accounts in the general ledger.
Content	A General Ledger of an organization is the record containing all its assets, revenue, liability, expense, gain, and loss accounts with the amount in respective accounts.	It is an internal report which summarizes accounts with debit balances and accounts with credit balances and proves that the total of the debit balances is equal to the credit balancesCredit Balances Credit 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.
Purpose	They are prepared for classifying different accounts like assets, liabilities, etc.	It is prepared to check the arithmetic accuracy of the total of debit and credit balance derived from General Ledger.
Classification of types along with examples	There are broadly seven classifications of the general ledger. Assets like Cash, Accounts ReceivableAccounts Receivable Accounts receivables refer to the amount due on the customers for the credit sales of the products or services made by the company to them. It appears as a current asset in the corporate balance sheet.read more, Land, Equipment, etc. Liabilities like Loans Payable, Accounts PayableAccounts Payable Accounts payable is the amount due by a business to its suppliers or vendors for the purchase of products or services. It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting period.read more, etc. Stockholders’ equity Operating revenuesOperating Revenues Operating revenue is defined as revenue earned by an individual, corporation, or organization from the core activities that they undertake on a regular basis. There are several methods to earn revenue, but operational revenue is earned by the core business activities that the organization undertakes in its daily operations.read more like Sales, Service Fees, etc.; Operating expenses like Salary Expense, Rent Expense, etc. Non-operating revenues and gains like Investment IncomeInvestment Income Investment income is the earnings made from allocating funds in financial instruments or assets like securities, mutual funds, bonds, property, etc. It includes dividends on bonds and interest received on bank deposits, profits and capital gain from the sale of real estate and securities. read more etc.; Non-operating expensesNon-operating Expenses Non operating expenses are those payments which have no relation with the principal business activities. These are the non-recurring items that appear in the company's income statement, along with the regular business expenses.read more and losses like Interest Expense etc.;	There are three types of trial balances: • The unadjusted trial balanceUnadjusted Trial Balance An unadjusted trial balance is the account balances reported directly from the general ledger without adjusting for the year-end journal entries. It acts as a starting point for analyzing account balances and adjusting entries.read more, • The adjusted trial balanceAdjusted Trial Balance Adjusted Trial Balance is a statement which incorporates all the relevant adjustments. Although it is not a part of financial statements, the adjusted balances are carried forward in the different reports that form part of financial statements. read more and, • The post-closing trial balancePost-closing Trial Balance Post Closing Trial Balance is the list of the all the balance sheet items along with their balances excluding the zero balance accounts and is used for the purpose of verification that temporary accounts are properly closed and the total of balances of all the debit accounts and all the credit accounts are equal.read more

Although both are important accounting cycle, there are many differences between them. They both have their respective importance and timing in the business cycleBusiness Cycle The business cycle represents the expansion and contraction of the economy that occurs due to ups and downs in the gross domestic product (GDP) of a country. It is experienced over the long term and goes parallel with the natural growth rate.read more. We can say in brief a general ledger is an account wise summary of all monetary transactions. In contrast, a trial balance is the debitThe Debit Debit is an entry in the books of accounts, which either increases the assets or decreases the liabilities. According to the double-entry system, the total debits should always be equal to the total credits.read more and credit balance of such ledger accounts.

Conclusion

It is essential to understand the difference between the general ledger and trial balance accurately since both represent crucial steps in the preparation of year-end financial statementsFinancial Statements Financial 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 like Balance sheets.

We can conclude that Trail Balance is the heart of any business. It is a summary of the business activities that occurred in an accounting period wherein the business activities are shown through different ledgers.

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General Ledger vs Trial Balance

Difference Between General Ledger and Trial Balance