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Trial balance is a statement showing lists of balances extracted from the ledger to test the arithmetical accuracy of the accounts. The technique ensures that debit and credit balances displayed in the ledgers are compiled. The totals of the debit and credit must be in agreement.

Note: All the ledger accounts must be balanced off and entered in the trial balance with the balance brought down (bal b/d). 

Uses of Trial Balance

1. The trial balance helps in testing the accuracy of the double entry.

2. It helps in the preparation of the financial statement.

3. It is useful for tracing errors

4. It provides a comprehensive list of all accounts, therefore it saves time.

5. It shows the summary of all accounts.

Nature of the Trial Balance

(a) Trial balance has columns for particulars, debit and credit sides.

(b) All items with debit balance in the ledger will be debited.

(c) All items with credit balance in the ledger will be credited.

(d) Total debit must be equal to total credit.

Differences between Trial Balance and Balance Sheet

S/NTrial BalanceBalance Sheet
(i).Shows list of ledger balancesStatement showing assets and liabilities.
(ii).It is prepared to prove the arithmetical accuracy of the ledger accounts.It is prepared to show the financial position of a business at a point in time.
(iii).In the trial balance, items are classified into debit and credit.Items are classified into assets and liabilities.
(iv).The preparation is at the discretion of the business.The preparation and presentation of the balance sheet is a legal obligation in any business.

Rules of Trial Balance

In preparing the trial balance, the rules below must be followed:

1. All assets must be debited

2. All Liabilities must be credited

3. All income or gain must be credited

4. All expenses must be recorded on the debit side.

Layout of Trial Balance

Particulars      Dr      Cr
        N        N
Capital        X
Furniture and fittings        X
Land and Building        X
Stock        X
Cash at Bank        X
Creditors      X
Loan      X
Provision for doubtful debts      X
Bad debts        X
Insurance        X
Rates        X
Sundries expenses        X
Premises        X
Sales      X
Return Inwards        X      
Return Outwards      X
Purchases        X
Discount allowed        X
Discount Received      X
Telephone        X
Bank Overdraft      X
Carriage Outwards        X
Accumulated Depreciation:
Land and Building      X
Equipment @ Cost          X
Rent received      X
Debtors          X
Plant and Machinery          X
Carriage Inwards          X
Loan Interest          X       
Loan        X
Petty Cash          X
Bills Payable        X
Bills receivable          X
Salaries and Wages          X
Drawings          X
        XX      XX


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