Introduction to trial balance

The entrepreneur/learner should recall that in the accounting cycle, once the ledger accounts have been established and balances extracted, the next step is to prepare a trial balance. A trial balance is a summary of all the transactions which took place within a specified financial period. A trial balance is simply a financial statement which depicts the summary of debit and credit balances for all accounts. To prepare a trial balance, all the accounts with debit balances or totals are posted on the debit side of the trial balance and all accounts with credit balances or totals are posted on the credit side of the trial balance.

Trial Balance Format


NB1: Opening inventory is part of the trial balance components and it is recorded on the debit side.

NB2: Closing inventory is indicated as additional information. Hence, it is not part of the items in the trial balance

The learner needs to understand that a trial balance is prepared for twofold reasons. One, it is a summary of all ledger account balances at the end of the given period and two, it is used to assess whether there was erroneous accounting entries. Therefore, if the debit and the credit sides of the trial balance are the same, it is assumed that there were no errors committed during the preparation of the ledger accounts. Otherwise if the two sides do not balance, there is existence of errors which need to be corrected. The entrepreneur/learner should note that although the two sides of the trial balance may be equal, this does not guarantee a zero error accounting entries per se for there are some types of errors that may not be detected by the trial balance as it will be discussed in level two of this tutorial series.

Steps of preparing trial balance

Step one;

Extract the balances brought down or account totals if it is a case of income or expense accounts from all available accounts at the end of the financial period


NB1: Step one is achieved by balancing all the ledger accounts provided

NB2: Whether balance brought down or totals are of Debit or Credit nature is determined by the nature of the account-ie asset, capital, liability, expense or income


Step two;

Post all Debit balances to the DEBIT column of the trial balance statement

Step three;

Post all Credit balances to the CREDIT column of the trial balance statement

Step four;

Add all debit and credit entry figures as they appear on the DR and CR column of the trial balance


The two sides will be equal

Example preparing a trial balance

Ballot Paper Co. Ltd had provided you with the following ledger accounts with details therein as follows;

Additional information

Opening inventory on 1/1/18 was $14,000

Closing inventory on 7/1/18 was   $7,500

Prepare the trial balance for the as at 7/1/18



Opening inventory is part of current period’s purchases hence it is posted on the Debit side of the trial balance

Closing inventory is assumed will be sold next financial period hence not for the current period. Therefore, it is excluded in the trial balance of the current period