Trial Balance is the report of accounting in which ending balances of different general ledger of the company are available; For example, utility expenses during a period include the payments of four different bills amounting $ 1,000, $ 3,000, $ 2,500 and $ 1,500, so in trial balance single utility expenses account will be shown with the total of all expenses amounting $ 8,000.
Trial Balance Examples
In this section, we will touch some of the real-life examples to understand the trial balance. As we know that trial balance is the first statement to be prepared to check the correctness of the double entry of any accounts, so it is important to understand the trial balance to make to correct accounts of the statement of any firm. The trial balance would be prepared for each and every account of any firm, but we will take some important problems and try to solve them to understand the working of trial balance.
It is not possible to explain each and every account to explain trial balance, but we will try to touch those examples which are important and crucial in accounting for every firm.
Trial Balance – Example #1
As per the definition of the trial balance, it is the first step in the preparation of the accounts of the statement of any firm. It is basically prepared at the end of the year of an accounting period to assist in the preparation of the final accounts.
Let’s take the first example of NSBHandicraft. We will prepare the trial balance as per the transactions are shown in below table for the firm on March 31st, 2019
As per the transactions are shown above, now we will prepare Trial Balance for NSBHandicraft as on March 31st, 2019.
As per the trial balance prepared for NSBHandicraft as on March, 31st 2019, we can see that the total of Debit side is the same as a total of credit side in the trial balance. Now we proceed for the preparation of other financial statements such as Profit and Loss account, Balance sheet, etc. by using of trial balance.
Trial balance is the first step for preparing financial statements of any firm. Suppose if the total of both debit and credit side is not matching, then we have to check the journal entries again and find out with transaction what was accounted wrongly.
Trial Balance – Example #2
Trial Balance is the end of the accounting process and the first step in preparing a final account of the firm. In the double entry accounting system, each debit balance will have the same amount of credit balance, if there is a difference between all debit balance and credit balance, there would be some errors in the posting of the accounting transactions.
Let’s consider one another example to understand the method of preparation of trial balance. Below are the balances from the books of Jyoti Enterprises as on March 31st, 2019.
Now we will prepare trial balance for Jyoti Enterprises as on March 31st, 2019 as per the balance is shown above,
As per the trial balance prepared for Jyoti Enterprises, we can see that both sides of the trial balance are the same which indicates that there is no error in ledger posting during the financial year. Trial balance shows all debit and credit balance in one statement and from here we will start preparing other financial statements of the firm.
Trial Balance – Example #3
From the above 2 examples, we have seen that both debit and credit side balance are the same in the trial balance which indicates that there is no error in posting accounting entries. Sometimes due to non-awareness of the accountant about any particular transaction, the accountant would post that transaction in suspense account which would be cleared after discussion with the concerned person for that particular transaction and accountant would try to match end balance in the trial balance.
In the same way, we will prepare trial balance for Go Green Pvt. Ltd as per the balance is shown below from the books of the accounts,
Trial Balance will be,
Trial Balance is not an account but it is a schedule of all the balances of all ledger account on a particular date. The trial balance will have Debit and credit columns, the account which is having a debit balance will be written on the debit side and the account which is having a credit balance will be posted on credit column side with actual balance amount.
So, what we have learned about trial balance from the above examples.
- Trial Balance is the statement of balances of all ledgers account of any firms on a particular date.
- The total of both sides means debit and credit side should be equal as for any transaction there would be a debit and credit for the same amount.
- If the total of the debit and credit side is equal, it means that the ledger posting for each and every transaction has been done correctly.
- If the totals of both side columns are not matching, it means there is some error in ledger posting for any particular account, and the difference would be posted into a suspense account and would be rectified post discussion with management and concerned team.
This has been a guide to Trial Balance examples. Here we discuss some of the real-life examples to understand the trial balance and learn how to prepare a statement of Trial Balance as per the transactions. You can learn more about accounting from the following articles –