Financial Accounting Concepts

# 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

Stock A/c

Building A/c

Rita A/c

Albert’s A/c

Capital A/c

Purchase A/c

Discount A/c

Plant A/c

Michael’s A/c

Sales A/c

Robert’s A/c

Trial Balance

## 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.

## 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

## 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.