General Ledger vs Trial Balance

Difference Between General Ledger vs Trial Balance

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

• A general ledger is the principal set of accounts. It is the main accounting records of a company. The ledger provides a complete record of accounting transactions 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 accounts for the specific period i.e. for a month, quarter, semi-annually, annually. In other words, taking all the ledger balances and presenting them in a single worksheet as on a particular date is Trial Balance. It basically gives a quick overview of the balances of different heads of account.

 General Ledger vs Trial Balance Infographics

Here we provide you with the top 4 difference between General Ledger vs Trial Balance

Example of General Ledger

Example of Trial Balance

Suppose we have the following information of XYZ Ltd.

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

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

General Ledger vs Trial Balance – Key Differences

The key differences between General Ledger vs Trial Balance are as follows –

• Amount & nature of information: The general ledger contains all accounts of an organization with its transactions. It is basically a database of information. Whereas the trial balance only contains 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, while the trial balance has only a few pages that have an ending balance of general ledger.
• Usage: For accountants, general ledger serves as the main 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 end audit of the organization, the auditors 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 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 Head to Head Difference

Let’s now look at the head to head difference between General Ledger vs Trial Balance

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 balance of each of the accounts in the general ledger.
Content		A General Ledger of an organization is the record containing all its asset, revenue, liability, expense, gain, and loss accounts with the amount in respective accounts.		Trial Balance 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 total of the credit balances.
Purpose		General ledgers are prepared for classifying different accounts like assets, liabilities, etc.		Trial balance is prepared to check the arithmetic accuracy of the total of debit and credit balance derived from General Ledger.
Classification or types along with examples		There are broadly seven classifications of the general ledger. Assets like Cash, Accounts Receivable, Land, Equipment, etc. Liabilities like Loans Payable, Accounts Payable, etc. Stockholders’ equity Operating revenues like Sales, Service Fees, etc. Operating expenses like Salaries Expense, Rent Expense etc. Non-operating revenues and gains like Investment Income etc. Non-operating expenses and losses like Interest Expense etc.		There are three types of trial balances: • The unadjusted trial balance, • The adjusted trial balance and, • The post-closing trial balance

Although both are important parts of the accounting cycle, there are many differences between General Ledger vs Trial Balance. They both have their respective importance and timing in the business cycle. We can say in brief a general ledger is an account wise summary of all monetary transactions, whereas a trial balance is the debit and credit balance of such ledger accounts.

Conclusion

It is important to understand the difference between the general ledger vs trial balance accurately since both represent important steps in the preparation of year-end financial statements like Balance sheets. We can conclude that Trail Balance is the heart of any business. It is basically, a summary of the business activities occurred in an accounting period wherein the business activities are shown through different ledgers.

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