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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 General Ledger vs. Trial Balance Infographics

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Example of General Ledger

example1
example2

Example of Trial Balance

Suppose we have the following information on XYZ Ltd.

Ledger vs Trial Balance example3

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

example4

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

Ledger vs Trial Balance flowchart

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Key Differences

The key differences are as follows –

General Ledger vs. Trial Balance Comparative Table

BasisGeneral LedgerTrial Balance
MeaningA 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.
ContentA 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 BalancesCredit 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.
PurposeThey 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 examplesThere are broadly seven classifications of the general ledger.

 

There are three types of trial balances:

 

• The unadjusted trial balanceUnadjusted Trial BalanceAn 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 BalanceAdjusted 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 BalancePost 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 CycleThe 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 DebitDebit 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 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 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.

Recommended Articles

This article has been a guide to General Ledger vs. Trial Balance. Here we discuss the top differences between the general ledger and trial balance along with infographics and comparison table. You may also have a look at the following articles –

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    • Dheeraj Vaidya says

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