Methods of Preparing a Trial Balance
A trial balance lists all debits and credits in your accounting system. The total of debits must equal the total of credits.
It’s an excellent tool for understanding your financial position because it gives you an easy-to-digest snapshot of what’s going on in your entire company. A trial balance is a financial statement that shows a company’s financial position at the end of each accounting period. It includes items such as cash, receivables, and inventories.
After all monthly transactions have been reviewed, journalized, and updated continuously throughout the accounting period (a month in our example), we may begin creating a trial balance (unadjusted). Preparing a trial balance without adjustments is the fourth phase in the accounting cycle.
Types of Trial Balance
In accounting, there are three kinds of Trial balances. They are:
Unadjusted Trial Balance
It only denotes the preparation of a trial balance prior to entering the correcting entries into the books of accounts. It is formulated before any modifications are made and before the ledger account balances are retrieved. Because this is not the final version of the data, it cannot be utilised to generate the financial statements because there may be revisions that need to be made.
Adjusted Trial Balance
It indicates that a trial balance is generated after correcting entries have been made in the books of accounts. Adjustments are made to ledger accounts, resulting in the entry of adjusting entries to correct mistakes, and any omitted transactions are recorded. It contains the final corrected balances. Consequently, it may be utilised to create financial statements.
Post Closing Trial Balance
It indicates that a statement is created after the closing entries have been finished in their entirety. After closing entries have been made in the books of accounts, it is produced by taking the ledger account balances and preparing them separately. This statement serves as the beginning trial balance that may be applied to the following fiscal year.
Methods of Preparation of Trial Balance
There are three methods of preparation of trial balance: Total method; Balance method, Total and balance method
Now we shall understand each method in detail with logic and illustration as follows:
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 of 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.
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