The Trial Balance
Peter Marshall Bsc (Econ) BA MBIM is a Fellow of the Society of Business Teachers, and an experienced educator in business subjects. He is also a prolific author and his books have been translated and sold worldwide. He lives in London, UK.
A listing of ledger balances
The trial balance is unlike anything we have seen so far, but it is quite simple to understand and quite simple to do. It is just a listing of all the ledger balances at a particular moment in time. You list the balances in two columns—one for the debit balances and one for the credit balances. If all the ledger divisions have been correctly posted your two columns will balance. Remember, for every transaction there have been two postings, a debit and a credit, so the sum of all the debits should equal the sum of all the credits. See example opposite.
We always talk of ‘extracting’ a trial balance, or ‘constructing’ or ‘drawing up’ a trial balance.
The trial balance is:
- a way of checking the accuracy of all previous postings
- a source, in a useful summary form, for putting together the firm’s final accounts later on.
Suppose the ledger balances of A. Frazer for the month of August 200X were as follows:
Purchases, £28, 879.00 Dr, Sales £48,133.00 Cr, Bank £981.00 Dr, Cash £50.00 Dr, Land and buildings £490,000.00 Dr, Machinery £100,000 Dr, Motor vehicle £80,000.00 Dr, Fixtures and fittings £60,000 Dr, Stock £3,600.00 Dr, Debtors £2,010.00 Dr, Creditors £3,190.00 Cr, Opening capital £178,199 Cr, Long-term, secured loan creditor £548,031.00 Cr, Heat and light £400.00 Dr, Motoring expenses £1,480.00 Dr, Insurance £240.00 Dr, Wages £6,913.00 Dr, Salaries £3,000.00 Dr.
Construct a trial balance as at 31 August 200X.