Format of Trial Balance - WallStreetMojo

Trial Balance has a tabular format which shows details of all ledgers balances at one place. It includes transactions done during the year as well along ... SkiptoprimarynavigationSkiptomaincontentSkiptoprimarysidebarSkiptofooter Home»AccountingResources»AccountingFundamentals»FormatofTrialBalanceArticlebyVishalGargReviewedbyDheerajVaidya,CFA,FRM WhatistheTrialBalanceFormat? TrialBalancehasatabularformatwhichshowsdetailsofallledgersbalancesatoneplace.Itincludestransactionsdoneduringtheyearaswellalongwiththeopeningandclosingbalancesofledgers,aseveryentityneedstoevaluateitsfinancialpositionoveraparticularspanoftime.Thetrialbalanceshowsthelistofalltheaccountswithbothdebitaswellascreditbalanceatoneplaceandhelpsinanalyzingthepositionandtransactionsenteredintoduringsuchtimeperiodatoneplace. Generally,thetrialbalanceformathasthreecolumns.FirstcolumnsorparticularsdescribetheledgeraccountDescribeTheLedgerAccountLedgerinAccounting,alsocalledtheSecondBookofEntry,isabookthatsummarizesallthejournalentriesintheformofdebits&creditstouseforfuturereference&createfinancialstatements.readmoreasnameorheadunderwhichsuchledgeriscreated.ThenthereisAMOUNTS(DEBIT),i.e.,theledgerswhichhavedebitbalances;generally,assetsofanentityareshownunderthiscolumn.ThelastisforAMOUNT(CREDIT),i.e.,thoseledgerswhichhavecreditbalancessuchassharecapitalShareCapitalSharecapitalreferstothefundsraisedbyanorganizationbyissuingthecompany'sinitialpublicofferings,commonsharesorpreferencestockstothepublic.Itappearsastheowner'sorshareholders'equityonthecorporatebalancesheet'sliabilityside.readmore,reservesandsurplusesReservesAndSurplusesReservesandSurplusistheamountkeptasidefromtheprofitsthataretobeusedeitherforthebusinessorfortheshareholderstopayoutdividends.Reservesandsurplusisreflectedundershareholdersfundsinthebalancesheet.readmore,currentandnon-currentliabilities,etc. Toillustratetheabovetext;aderivedtableisasfollows: ParticularsAmount(Dr)Amount(Cr) ExplanationofTrialBalance TheTrialBalancecanbepreparedbyusingthefollowingsteps: Makeledgerpostingofallthejournalentries.Re-verify,whetheranytransactionisomittedorallthebalancesarepreparedcorrectlyornot?Afterthat,thefinalstepistoarrangetheclosingbalancesofalltheledgeraccountsindebitandcreditarrayatoneplacecalledTrialBalance. Purpose TheprimarypurposeofpreparingthetrialbalanceformatinexcelistoreconcilealltheledgerbalancestomakethefinancialstatementsFinancialStatementsFinancialstatementsarewrittenreportspreparedbyacompany'smanagementtopresentthecompany'sfinancialaffairs overagiven period(quarter,sixmonthlyoryearly).Thesestatements,whichincludetheBalanceSheet,IncomeStatement,CashFlows,andShareholdersEquityStatement,mustbepreparedinaccordancewithprescribedandstandardizedaccountingstandardstoensureuniformityinreportingatalllevels.readmoreoftheentityattheendofaparticularperiod,submittedorpreparedasperthelegalregulations.Insimplewords,itcanbesaidthatthefundamentalfirststepistopassjournalentries.Afterthat,thosejournalentriespassedwouldbepostedtorespectiveledgerscalledledgerposting.Afterthat,onlythecorrectclosingbalancesofalltheledgerscouldbeseenfromtheTrialBalance.Sometimes,governinglawmandatesthepreparationofTrialBalance,soforsatisfyingthatpurposealso,someentitiespreparethetrialbalance. TrialBalanceFormat Thetrialbalanceinexcelisasfollows: Aspertheabove-drawntrialbalancethatalltheassetshaveadebitbalanceDebitBalanceInaGeneralLedger,whenthetotalcreditentriesarelessthanthetotalnumberofdebitentries,itreferstoadebitbalance.AdebitbalanceisanetamountoftencalculatedasdebitminuscreditintheGeneralLedgerafterrecordingeverytransaction.readmore,andalltheliabilitieshavecreditbalanceCreditBalanceCreditBalanceisthecapitalamountthatacompanyowestoitscustomers&itisreflectedontherightsideoftheGeneralLedgerAccount.Usually,Liabilityaccounts,Revenueaccounts,EquityAccounts,Contra-Expense&Contra-Assetaccountstendtohavethecreditbalance.readmoreexceptthebalancesofBankoverdraftOverdraftOverdraftisabankingfacilitythatoffersshort-termcredittotheaccountholdersbyallowingthemtowithdrawmoneyfromtheirsavingsorcurrentaccounteveniftheiraccountbalanceisorbelowzero.Itsauthorizedlimitdiffersfromcustomertocustomer.readmore,whichhavecreditbalancebutshownonthedebitside.Asshownabove,thesalarypayableSalaryPayableSalarypayablereferstotheliabilityofthecompanytowardsitsemployeesagainsttheamountofsalaryofaperiodthatbecameduebuthasnotbeenpaidyettothembythecompanyanditisshowninthebalanceofthecompanyundertheheadliability.readmoreandrentpayableshowonthecreditside.Thesearetheliabilitiesofthebusinesstobepaidshortlyandhenceshownasacreditbalance.Themainthingtofocusonisthatthetotalbalanceofthecreditsideanddebitsideoftrialbalancewouldalwaysmatchifallthepostingsmadecorrectly. ExamplesofTrialBalanceFormat Example#1 PreparethetrialbalanceofABCInc.fromtheavailablebalancesasondate31.03.2019,whichasfollows: ParticularsAmountBusinessLoans&Advances$500,000Reserve&Surplus$2,250,000Profit&LossBalance$112,000Goodwill$1,000,000TradeReceivables$62,500TelephoneCharges$50,000TangibleAssets$1,250,000Investments$500,000 Now,thetrialbalanceofABCInc.ason31.03.2019isasfollows: Themainthingtonoticehereisthetotalofdebitandcreditsideofthetrialbalanceisequal. Example#2 PreparethetrialbalanceofanNBFChavingfollowingledgerbalancesasondate31.03.2019whichasfollows: ParticularsAmountLoans$50,000,000SalaryPaid$1,250,000Profit&LossBalance$2,512,000ProvisionforBadDebts$4,000,000InstallmentsReceivables$47,262,500 Now,thetrialbalanceofNBFCason31.03.2019isasfollows: Conclusion Trialbalanceisanessentialtoolforanybusinessconcerntoreconcilewhetherthebooksofaccountsarecorrectlymaintainedornot.Theledgerbalances,i.e.,ofallexpenses,incomes,receipts,payments,assets,liabilities,sharepremiums,etc.aretobereportedinthetrialbalance.ThedebitbalanceofprofitandlossaccountProfitAndLossAccountTheProfit&Lossaccount,alsoknownastheIncomestatement,isafinancialstatementthatsummarizesanorganization'srevenueandcostsincurredduringthefinancialperiodandisindicativeofthecompany'sfinancialperformancebyshowingwhetherthecompanymadeaprofitorincurredlossesduringthatperiod.readmoreistobeshownonthecreditsideofthetrialbalancebymentioninganegativesignintheamountcolumn. Whilepreparingtheledgersandtrialbalances,onemustbeveryalerttocheckwhethereachledgeriscorrectlyprepared.Otherwise,thefinalresultcansaythefinancialstatementsprepareddonotshowustheaccuratepictureorresultsofthebusinessoperationsBusinessOperationsBusinessoperationsrefertoallthoseactivitiesthattheemployeesundertakewithinanorganizationalsetupdailytoproducegoodsandservicesforaccomplishingthecompany'sgoalslikeprofitgeneration.readmore. Finally,apersonwhohasagoodknowledgeofaccountingandhasrelevantexperiencesinsuchafieldshouldbeassignedresponsibilitytopreparethetrialbalancesoftheentityfortheselectedperiod,followedbythepreparationoffinancialstatements. RecommendedArticles ThisarticlehasbeenaguidetotheFormatofTrialBalance.Herewediscussexamplesoftrialbalanceinexcelanditspurposewithadetailedexplanation.Youcanlearnmoreaboutfinancingfromthefollowingarticles– TrialBalanceinAccountingExamplesofTrialBalancePostClosingTrialBalanceWhatisAdjustedTrialBalance? 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