Trial Balance Examples Real Life Example Of Trial Balance In Accounting

Trial Balance Examples

In this section, we will touch on real-life examples to understand the trial balance. As we know, the Trial Balance is the report of accounting in which ending balances of a different general ledger are presented into the debit/credit column as per their balances where debit amounts are listed on the debit column, and credit amounts are listed on the credit column. The total of both should be equal.read moretrial balanceTrial BalanceTrial Balance is the report of accounting in which ending balances of a different general ledger are presented into the debit/credit column as per their balances where debit amounts are listed on the debit column, and credit amounts are listed on the credit column. The total of both should be equal.read more is the first statement to be prepared to check the correctness of the double entry of any accountsThe Double Entry Of Any AccountsThe double-entry accounting system refers to the double effect of every journal entry. It is based on the dual aspect i.e. Debit and Credit and this principle states that for every debit, there must be an equal and opposite credit.read more, so it is important to understand the trial balance to make correct accounts of the statement of any firm. The trial balance would be prepared for every firm account, but we will take some important problems and try to solve them to understand the working of the trial balance.

It is impossible to explain every account to explain the trial balance, but we will try to touch on 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 prepared at the end of the year of an accounting period to assist in preparing the final accounts.

Let’s take the first example of NSBHandicraft. We will prepare the trial balance as per the transactions shown below table for the firm on March 31st, 2019

As per the transactions shown above, now we will prepare the Trial Balance for NSBHandicraft as of March 31st, 2019.

As per the trial balance prepared for NSBHandicraft as of March 31st, 2019, we can see that the total of the Debit side is the same as the total of the credit side in the trial balance. We proceed with preparing otherFinancial 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 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, such as Profit and Loss Accounts, Balance sheet, etc., by using trial balances.

Trial balance is the first step in preparing the financial statements of any firm. Suppose if the total of both debit and credit sides is not matching, then we have to check the journal entries again and find out what was accounted for wrongly with the transaction.

Trial Balance – Example #2

Trial Balance is the end of the accounting process and the first step in preparing a final firm account. In theDouble Entry Accounting System is an accounting approach which states that each & every business transaction is recorded in at least 2 accounts, i.e., a Debit & a Credit. Furthermore, the number of transactions entered as the debits must be equivalent to that of the credits. read more double-entry accounting systemDouble-entry Accounting SystemDouble Entry Accounting System is an accounting approach which states that each & every business transaction is recorded in at least 2 accounts, i.e., a Debit & a Credit. Furthermore, the number of transactions entered as the debits must be equivalent to that of the credits. read more, each debit balance will have the same credit balance amount. If there is a difference between all debit and credit balances, there would be some errors in the posting of the accounting transactionsAccounting TransactionsAccounting Transactions are business activities which have a direct monetary effect on the finances of a Company. For example, Apple representing nearly $200 billion in cash & cash equivalents in its balance sheet is an accounting transaction. read more.

Let’s consider another example to understand the method of preparation of trial balance. Below are the balances from the books of Jyoti Enterprises as of March 31st, 2019.

Now we will prepare the trial balance for Jyoti Enterprises 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, indicating no error in ledger posting during the financial year. The trial balance shows all debit and credit balances in one statement, and from here, we will start preparing other financial statements of the firm.

Trial Balance – Example #3

From the above two examples, we have seen that both debit and credit side balances are the same in the trial balance, indicating no error in posting accounting entries. Sometimes due to the non-awareness of the accountant about any particular transaction, the accountant would post that transaction in a suspense account, which would clear after discussion with the concerned person for that particular transaction, and the accountant would try to match the end balance in the trial balance.

In the same way, we will prepare a trial balance for Go Green Pvt. Ltd as per the balance is shown below from the books of the accounts,

Trial Balance will be,

A trial balance is not an account, but a schedule of all the balances of allLedger in accounting records and processes a firm’s financial data, taken from journal entries. This becomes an important financial record for future reference. It is used for creating financial statements. It is also known as the second book of entry.read more ledger accountsLedger AccountLedger in accounting records and processes a firm’s financial data, taken from journal entries. This becomes an important financial record for future reference. It is used for creating financial statements. It is also known as the second book of entry.read more on a particular date. The trial balance will have Debit and credit columns, the account with aIn a General Ledger, when the total credit entries are less than the total number of debit entries, it refers to a debit balance. A debit balance is a net amount often calculated as debit minus credit in the General Ledger after recording every transaction.read more debit balanceDebit BalanceIn a General Ledger, when the total credit entries are less than the total number of debit entries, it refers to a debit balance. A debit balance is a net amount often calculated as debit minus credit in the General Ledger after recording every transaction.read more will be written on the debit side, and the account with a credit balanceHaving A Credit BalanceCredit 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, will be posted on the credit column side with the actual balance amount.

Conclusion

So, what we have learned about trial balance from the above examples.

Trial Balance is the statement of balances of all ledger accounts of any firm on a particular date.The total of both sides means the debit and credit sides 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 sides is equal, the ledger posting for every transaction has been done correctly.Suppose the totals of both side columns are not matching. In that case, there is some error in the ledger posting for any particular account. The difference would be posted into a suspense account and rectified post discussion with management and the concerned team.