Methods of Preparing a Trial Balance

A trial balance is a listing of all the general ledger accounts in a company’s accounting system at a specific point in time. It shows the ending balances (debit or credit) for each account. The main purpose of a trial balance is to check for mathematical errors in the bookkeeping.

Methods of Preparation of Trial Balance

There are three methods of preparing a trial balance: Total method; Balance method, Total and balance method. Let’s discuss them in detail:

Total Method

Under this method, every ledger account is totalled, and that total amount (both on the debit and credit sides) is transferred to the trial balance. This method can prepare the trial balance as soon as the ledger account is totalled.

Time taken to balance the ledger accounts is saved under this method as the balance can be found out in the trial balance itself. The difference in totals of each ledger account is the balance of that particular account. This method is not commonly used as it cannot help in the preparation of the financial statements

Suppose the following ledger balances are provided to us, and we have to prepare a trial balance:

Bank A/c

Dr.							Cr.
Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 1	To balance b/d		20000	Jan 31	By Balance c/d		20000
			20000				20000
Feb 1	To balance c/d		20000

Stock A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 1	To balance b/d		20000	Jan 31	By balance c/d		20000
			20000				20000
Feb 1	To Balance b/d		20000

Building A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 1	To balance b/d		10000	Jan 31	By Balance c/d		10000
			10000				10000
Feb 1	To Balance b/d		10000

Rita A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 1	To balance b/d		2000	Jan 31	By Balance c/d		2000
			2000				2000
Feb 1	To Balance b/d		2000

Albert’s A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 31	To balance c/d		5000	Jan 1	By Balance b/d		5000
			5000				5000
				Feb 1	By Balance b/d		5000

Capital A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 31	To balance c/d		55000	Jan 1	By Balance b/d		55000
			55000				55000
				Feb 1	By Balance b/d		55000

Purchase A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 1	To cash A/c		3800	Jan 31	By balance c/d		4000
	To Discount A/c		200
			4000				4000
Feb 1	To balance b/d		4000

Discount A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
				Jan 1	By Purchases A/c		200
Jan 31	To balance c/d		200
			200				200
				Feb 1	By Balance b/d		200

Plant A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 8	To Michael A/c		5000	Jan 31	By Balance c/d		5300
Jan 8	To Cash A/c		300
			5300				5300
Feb 1	To Balance b/d		5300

Michael’s A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 31	To balance c/d		5000	Jan 8	By plant A/c		5000
			5000				5000
				Feb 1	By balance b/d		5000

Sales A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 31	To balance c/d		1600	Jan 12	By Robert		600
				Jan 18	By Cash		1000
			1600				1600
				Feb 1	By Balance b/d		1600

Robert’s A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 12	To Sales A/c		600	Jan 15	By Cash A/c		300
				Jan 15	By Bad Debts A/c		300
			600				600

Bad Debts A/c

Date	Particular	J.F.	$	Date	Particular	J.F.	$
Jan 15	To Robert		300	Jan 31	By Balance c/d		300
			300				300
Feb 1	To balance b/d		300

Solution

Trial Balance

Sr. No.	Name of Account	Total Debit	Total Credit
1	Cash	9300	4100
2	Bank	20000
3	stock	20000
4	Building	10000
5	Rita	2000
6	Albert		5000
7	Capital		55000
8	Purchase	4000
9	Discount		200
10	Plant	5300
11	Michael		5000
12	Sales		1600
13	Bad Debts	300
		70900	70900

Balance Method

Under this method, every ledger account is balanced, and those balances only are carried forward to the trial balance. This method is commonly used by accountants and helps in the preparation of financial statements. Financial statements are prepared on the basis of the balances of the ledger accounts.

Trial Balance

Sr. No.	Name of Account	Debit Balance	Credit Balance
1	Cash	5200
2	Bank	20000
3	stock	20000
4	Building	10000
5	Rita	2000
6	Albert		5000
7	Capital		55000
8	Purchase	4000
9	Discount		200
10	Plant	5300
11	Michael		5000
12	Sales		1600
13	Bad Debts	300
		66800	66800

The Total and Balance Method

Under this method, the above two explained methods are combined. Under this method statement of trial, balance contains seven columns instead of five columns.

Trial Balance

Sr. No.	Name of Account	Total Debit	Total Credit	Debit Balance	Credit Balance
1	Cash	9300	4100	5200
2	Bank	20000		20000
3	stock	20000		20000
4	Building	10000		10000
5	Rita	2000		2000
6	Albert		5000		5000
7	Capital		55000		55000
8	Purchase	4000		4000
9	Discount		200		200
10	Plant	5300		5300
11	Michael		5000		5000
12	Sales		1600		1600
13	Bad Debts	300		300
		70900	70900	66800	66800

Conclusion

A trial balance is a method of checking to make sure that all the transactions in a financial period are balanced. It ensures that there are no overdrafts, under or overpayments in the transaction and thus provides a good picture of the account. In this post, you have learnt about three preparation methods for the trial balance.