Trial Balance

The Trial Balance is a statement of ledger balances on a particular date. It lists the accounts together with their
debit and credit balances extracted at a given date from the ledger.

Preparation of a Trial Balance

The following are the steps taken in preparing a Trial Balance:
1. Determine the balances of each account in the ledger
2. List the account titles and their balances.
3. Total the debit and credit balances.
4. Prove their equality.

Trial Balance as at ..
Title of Accounts Debit Credit
Assets XXX
Expenses XXX
Drawings XXX
Capital XXX
Liabilities XXX
Incomes XXX
Provisions XXX
XXX XXX

Items recorded on the debit side of a Trial Balance:

1. Assets Account
Examples:
Property, Furniture, Computer equipment, Motor vehicle, Trade receivables, Cash and cash equivalent -
cash, cash and cash equivalent - bank, Petty cash, other receivables etc.

2. Expenses Account
Examples:
Ordinary goods purchased, Rent, Electricity, Telephone, Water, Wages, Insurance, Advertising, General
expenses, Bad debts, Depreciation, Carriage inwards, Carriage inwards, Returns inwards, Discount
allowed, etc.

3. Drawings

Items recorded on the credit side of a Trial Balance:

1. Liabilities Account
Examples:
Trade payables, Loans, Bank overdraft, other payables, etc

2. Incomes Account
Examples:
Commission received, Interest received, Rent received, discount received, dividend received, purchases
returns, etc.

3. Capital

4. Provisions





Uses of Trial Balance

The main purposes of the Trial Balance are as follows:

1. To check arithmetical accuracy of debits and credits / to check the arithmetical accuracy of the double
entry records

Double-entry bookkeeping is the recording of business transaction using the double entry principle, that
is, always debiting an account and crediting another account with the same amount. Thus, the total of
the debits should equal to the credits.

2. It facilitates preparation of financial statements

As all ledger balances are found in the Trial Balance, financial statements (Comprehensive Income
Statement and Statement of Financial Position) can be prepared from them

Limitations of Trial Balance

A Trial Balance that balances does not necessarily prove that all transactions have been properly recorded or
that the accounting process is error-free. This is because numerous mistakes exist even though the Trial
Balance totals are in agreement. (This will be dealt in the chapter correction of errors)





































Format of Trial Balance:
Trial Balance as at .
Title of Accounts Debit Credit
Opening Inventory XXX Asset
Ordinary goods purchased XXX Expense
Sales returns / returns inwards XXX Expense
Drawings XXX Drawings
Revenue XXX Income
Purchases returns/ returns outwards XXX Income
Goodwill XXX Asset
Plant and Machinery XXX Asset
Furniture and Fittings XXX Asset
Property XXX Asset
Motor Vehicles XXX Asset
Premises XXX Asset
Office Equipment XXX Asset
Trade receivables XXX Asset
Trade payables XXX Liability
Cash and cash equivalent cash XXX Asset
Cash and cash equivalent bank XXX Asset
Bank overdraft XXX Liability
Discount allowed XXX Expense
Discount received XXX Income
Carriage inwards XXX Expense
Carriage outwards XXX Expense
Stationery XXX Expense
Rent payable XXX Expense
Commission payable XXX Expense
Insurance XXX Expense
Repairs and maintenance XXX Expense
Wages and salaries XXX Expense
Interest on loan XXX Expense
Air freight charges XXX Expense
Telephone bills XXX Expense
Depreciation charges XXX Expense
Bad debt XXX Expense
Provision for bad and doubtful debt XXX Provision
Provision for depreciation XXX Provision
Capital XXX Capital
Loan from bank XXX Liability
Dividend received XXX Income
Rent received XXX Income
Other receivables XXX Asset
Commission received XXX Income
Other payables XXX Liability
XXX XXX
Closing inventory
Note: Closing inventory is recorded outside the Trial Balance