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Trial Balance

After transferring the records to the Journal (Journal Entries) and from there to the account in the Nominal Ledger, the balance for each account is found (by hand or by using a computerized system).
We will organize all the transactions and balance in every account in the nominal ledger into a table. This arrangement is called the Trial Balance.

Account Name Debit Transaction Credit Transaction Debit Balance Credit Balance
Cash 10,000  5,600  4,400 
Owners Equity 10,000  10,000 
City Central current account 10,100  4,900  5,200 
Fixed assets 1,300  1,300 
Rental expenses 600  600 
Electricity expenses 400  400 
Purchase of goods 4,200  4,200 
Sales of Goods 6,000  6,000 
Income from interest 100  100 
TOTAL 26,600 
TOTAL     16,100 

The expression 'Trial Balance' comes, as is shown in the table, from the fact the debit and credit columns must balance (hence the word balance). Moreover the above table constitutes a trial (check) that the records in the journal have been properly transferred to the nominal ledger.
It is important to point out that the fact that the Trial Balance (flow or balances) balances is not necessarily proof that the entries in the journal were recorded correctly. However, this subject is not under discussion just now. We will be content with pointing out the following main facts:

Trial Balance (Flow)

In addition to the fact that the "Debit Transaction" column is identical to the "credit transaction" column, both columns must be equal to the sum in the journal (in the example before you, the journal total was $ 26,600 as well.

The Trial Balance (Balances)

This is in fact the more important of the two Trial Balances. In the Trial Balance (balances), the "Total Debit Balances" column must be identical to the "Total Credit Balances" column. Nevertheless, the column total (in our example, $ 16,100) will always be less than the journal total or the "Trial Balance (Flow)" column. As has been mentioned, the more important Trial Balance is the Trial Balance "(Balances)" as the balances are transferred directly from it to the two main statements that are prepared at the end of the year.

The two statements are:
A. The Profit and Loss Statement.
B. The Balance Sheet.

The two statements are known as the Annual Statements.

The Development of Bookkeeping The debit & credit rules Journal Entries Nominal Ledger Trial Balance Annual Statements (Profit & Loss/Balance Sheet) The Balance Sheet
Bank Reconciliation Salaries Tax Deduction at Source Value added tax


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