A Trial Balance is a statement that shows all the balances from the ledger accounts at a particular date. It is prepared to test the accuracy of the double-entry bookkeeping system. In simple terms, a trial balance lists all debit balances and credit balances from the ledger to see if the total debits equal total credits.

When total debits equal total credits, it shows that the ledger entries are arithmetically correct. However, it does not mean that there are no errors at all — some errors may not affect the trial balance agreement.

The trial balance is prepared for several important reasons:

1. It helps you to check the arithmetical accuracy of ledger accounts.


2. It helps you to detect errors in recording transactions.


3. It helps you to provide a summary of ledger balances for preparing final accounts.


4. It helps you to ensure that debits and credits are equal.


5. It helps you to prepare financial statements like the Trading, Profit and Loss Account, and Balance Sheet.


6. It helps you to identify omissions or mistakes in ledger postings.

Name of Account	Debit (₦)	Credit (₦)
Cash	15,000
Purchases	10,000
Sales		20,000
Rent Expense	2,000
Capital		7,000
Drawings	3,000
Total	30,000	30,000

In a trial balance:

1. The debit side shows all assets, expenses, and losses.


2. The credit side shows all liabilities, revenues, and gains.

To prepare a trial balance, follow these steps:

1. Close all ledger accounts and find their balances (either debit or credit).


2. List all account names with their balances in a table.


3. Record debit balances in the debit column and credit balances in the credit column.


4. Add up both sides of the trial balance.


5. Compare the totals — if both sides agree, the trial balance is correct arithmetically.

Example 1:

From the following ledger balances, prepare a trial balance as at 31st December, 2025:

1. Cash ₦5,000


2. Capital ₦8,000


3. Rent ₦1,000


4. Purchases ₦3,000


5. Sales ₦6,000


6. Drawings ₦500

Solution:

Account Name	Debit (₦)	Credit (₦)
Cash	5,000
Purchases	3,000
Rent	1,000
Drawings	500
Sales		6,000
Capital		8,000
Totals	9,500	14,000

Now, there is a difference of ₦4,500 — that means there is an error somewhere that must be investigated and corrected.

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Example 2:

From the following ledger balances of Bright Future Enterprises as at 31st December, 2025, prepare a Trial Balance.

1. Cash in Hand ₦8,500


2. Cash at Bank ₦25,000


3. Capital ₦40,000


4. Sales ₦65,000


5. Purchases ₦30,000


6. Rent ₦6,000


7. Electricity ₦1,500


8. Salaries ₦8,000


9. Stationery ₦1,000


10. Motor Vehicle ₦20,000


11. Drawings ₦5,000


12. Loan from Bank ₦18,000

Solution:

Account Name	Debit (₦)	Credit (₦)
Cash in Hand	8,500
Cash at Bank	25,000
Purchases	30,000
Rent	6,000
Electricity	1,500
Salaries	8,000
Stationery	1,000
Motor Vehicle	20,000
Drawings	5,000
Sales		65,000
Loan from Bank		18,000
Capital		40,000
Totals	105,000	123,000

Observation: The credit side exceeds the debit side by ₦18,000. This shows that an error or omission has occurred in the books. The difference might be due to a missing asset or expense that was not recorded on the debit side.

Possible causes of the difference:

1. Omission of an expense account (for example, insurance or wages not posted).


2. Error in totaling the debit side of the trial balance.


3. Wrong posting of an amount to the credit side instead of the debit side.


4. An additional entry made in the credit side of a ledger account.

After correction, both the debit and credit sides of the Trial Balance should agree at ₦123,000, showing that the ledger is arithmetically accurate.

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Example 3: Preparation of Trial Balance

The following are the ledger balances extracted from the books of Graceful Ventures as at 30th September, 2025. Prepare a Trial Balance.

1. Cash ₦12,000


2. Bank ₦28,000


3. Capital ₦50,000


4. Sales ₦75,000


5. Purchases ₦45,000


6. Wages ₦9,000


7. Rent ₦7,000


8. Furniture ₦15,000


9. Insurance ₦3,000


10. Electricity ₦2,000


11. Drawings ₦6,000


12. Loan from ABC Bank ₦20,000


13. Motor Expenses ₦3,000

Solution:

Account Name	Debit (₦)	Credit (₦)
Cash	12,000
Bank	28,000
Purchases	45,000
Wages	9,000
Rent	7,000
Furniture	15,000
Insurance	3,000
Electricity	2,000
Drawings	6,000
Motor Expenses	3,000
Sales		75,000
Loan from ABC Bank		20,000
Capital		50,000
Totals	130,000	145,000

Observation: The totals do not balance — there is a difference of ₦15,000 on the credit side. This shows that some errors or omissions exist in the accounts that need to be corrected.

Possible reasons for the difference include:

1. An expense such as advertising or repairs might not have been recorded.


2. A transaction might have been entered twice on the credit side.


3. One ledger balance might have been omitted from the debit column.


4. There may be an error of posting or an incorrect balance carried forward.

After correction, the total of both debit and credit sides should be ₦145,000, proving that the ledger accounts are arithmetically accurate.

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Sometimes, the totals of the trial balance do not agree because of errors. These errors are grouped into two main types:

Errors Disclosed by the Trial Balance

These are errors that make the trial balance not to agree. Examples include:

1. Error of partial omission (one side of the transaction is not recorded).


2. Error in addition or subtraction.


3. Posting to the wrong side of an account.


4. Error in balancing ledger accounts.

Errors Not Disclosed by the Trial Balance

These are errors that do not affect the agreement of the trial balance. Examples include:

1. Error of omission (both sides of a transaction are not recorded).


2. Error of commission (correct amount but wrong account).


3. Error of principle (posting to the wrong type of account).


4. Compensating error (two errors cancel each other out).


5. Error of original entry (wrong amount entered on both sides).

When errors are discovered, they must be corrected properly. Methods include:

1. Journal Correction – Errors are corrected by passing adjusting entries in the journal.


2. Suspense Account – A temporary account created to balance the trial balance until the errors are corrected.


3. Cross-checking – Carefully rechecking each ledger posting to find and correct mistakes.

1. It serves as the basis for preparing final accounts.


2. It provides a summary of all ledger balances.


3. It helps you to detect errors quickly.


4. It helps you to analyze financial performance easily.


5. It helps to ensure that accounting records are complete and accurate.

1. It cannot detect all errors, especially those not affecting debit and credit equality.


2. It does not show whether transactions are posted to the correct accounts.


3. It cannot detect fraud or deliberate falsification of accounts.


4. It only checks mathematical accuracy, not the truthfulness of data.

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Summary

A trial balance is a statement prepared to test the mathematical accuracy of ledger accounts. It lists all debit and credit balances to ensure that total debits equal total credits. Even if the trial balance agrees, it does not mean that all entries are correct. It helps to prepare the final accounts, which include the Trading Account, Profit and Loss Account, and Balance Sheet.