A Trial Balance is a statement that lists the balances of all the accounts in the ledger as at a particular date. It is prepared to check the accuracy of the entries made in the ledger. In other words, it is a list showing all the debit balances on one side and all the credit balances on the other side.

When all transactions are properly recorded using the double entry principle (which means that every debit must have a corresponding credit), the total of the debit balances should be equal to the total of the credit balances.

Therefore, a trial balance helps you to check if the ledger accounts are arithmetically correct.

A trial balance is not an account but a statement that performs several important functions. It helps you to confirm that your ledger entries are accurate and complete. The main objectives or uses include:

1. It helps you to ensure that the total debit balances equal the total credit balances.


2. It helps you to confirm the accuracy of postings in the ledger accounts.


3. It provides a summary of all the ledger account balances in one place.


4. It helps you to prepare the final accounts such as the Trading Account, Profit and Loss Account, and Balance Sheet.


5. It helps you to detect certain types of errors that may occur while recording transactions.


6. It serves as a link between the ledger and the final accounts.


7. It helps you to make sure that the double entry bookkeeping principle has been properly followed.

When preparing a trial balance, you extract the closing balances of all the ledger accounts. These balances can either be debit or credit, depending on the nature of the account.

Debit Balances:

These are balances of accounts that represent assets and expenses. Examples include:

1. Cash


2. Debtors


3. Furniture and equipment


4. Purchases


5. Rent paid


6. Wages and salaries

Credit Balances:

These are balances of accounts that represent liabilities, income, and capital. Examples include:

1. Creditors


2. Loans


3. Sales


4. Capital


5. Commission received

To prepare a trial balance, follow these steps carefully:

1. Extract Balances: From each ledger account, find the closing balance.


2. List Account Names: Write the names of all accounts in the first column of the trial balance.


3. Separate Debits and Credits: Write the debit balances in the debit column and the credit balances in the credit column.


4. Add the Columns: Add up both the debit and credit columns separately.


5. Compare Totals: If both totals are equal, the trial balance is said to balance. If they do not agree, it means that an error exists in the ledger or posting.

A trial balance is usually presented in a table form with three main columns:

Account Name	Debit (₦)	Credit (₦)
Cash	10,000
Debtors	5,000
Purchases	8,000
Sales		15,000
Creditors		3,000
Capital		5,000
Total	23,000	23,000

If both sides are equal, the trial balance is correct arithmetically.

There are three common forms in which a trial balance can be presented:

1. Horizontal or "T" Form: This is the traditional method. Debit balances are listed on the left hand side, and credit balances are listed on the right hand side.


2. Vertical Form: In this form, accounts are listed in a single column, but the debit and credit amounts are placed in separate sub columns.


3. Account Form: Each account is listed with its balance on the side it normally belongs to. This method is rarely used at the junior level but is common in larger organizations.

A trial balance helps you to identify which items belong to the balance sheet and which items belong to the income statement.

Items that belong to the Balance Sheet:

1. Assets: Cash, Buildings, Equipment, Debtors, Stock


2. Liabilities: Creditors, Loans, Bank overdraft


3. Owner's Equity: Capital

Items that belong to the Income Statement (Trading and Profit and Loss Account):

1. Incomes: Sales, Commission received, Interest received


2. Expenses: Rent, Salaries, Wages, Electricity, Transport, Stationery

The trial balance therefore serves as a guide to prepare both the balance sheet and the income statement correctly.

Even if a trial balance balances, it does not mean that all the transactions are completely correct. Some errors cannot be detected by a trial balance. These include:

1. Error of Omission: When a transaction is completely left out of the books.


2. Error of Commission: When an entry is made in the wrong account of the same class.


3. Error of Principle: When an entry is made in the wrong class of account, for example, treating a capital expense as a revenue expense.


4. Compensating Error: When two or more errors cancel each other out.


5. Error of Original Entry: When a wrong amount is recorded in the journal and posted to both accounts.

Therefore, a trial balance only proves arithmetic accuracy, not absolute correctness.

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Example 1

Question:
The following are the balances extracted from the ledger of Mr. Ade as at 31st December, 2024:

1. Cash ₦12,000


2. Debtors ₦6,000


3. Purchases ₦15,000


4. Sales ₦25,000


5. Creditors ₦5,000


6. Capital ₦8,000

Required: Prepare a Trial Balance.

Account	Debit (₦)	Credit (₦)
Cash	12,000
Debtors	6,000
Purchases	15,000
Sales		25,000
Creditors		5,000
Capital		3,000
Total	33,000	33,000

Since the total of debit balances equals the total of credit balances, the trial balance is said to balance.

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Worked Example 2

Question:
The following are the balances extracted from the ledger of Bright Enterprises as at 30th June, 2025:

1. Cash ₦25,000


2. Bank ₦18,000


3. Furniture ₦10,000


4. Purchases ₦40,000


5. Sales ₦65,000


6. Creditors ₦12,000


7. Debtors ₦15,000


8. Rent ₦5,000


9. Wages ₦8,000


10. Capital ₦44,000

Required: Prepare a Trial Balance.

Account	Debit (₦)	Credit (₦)
Cash	25,000
Bank	18,000
Furniture	10,000
Purchases	40,000
Debtors	15,000
Rent	5,000
Wages	8,000
Sales		65,000
Creditors		12,000
Capital		44,000
Total	121,000	121,000

Since the total debit equals the total credit, the trial balance of Bright Enterprises is correct arithmetically.

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Worked Example 3

Question:
The following are the balances extracted from the ledger of Success Stores as at 31st March, 2025:

1. Cash ₦30,000


2. Bank ₦20,000


3. Stock ₦18,000


4. Purchases ₦50,000


5. Sales ₦85,000


6. Creditors ₦22,000


7. Debtors ₦25,000


8. Rent ₦6,000


9. Wages ₦10,000


10. Capital ₦57,000


11. Electricity ₦3,000

Required: Prepare a Trial Balance.

Account	Debit (₦)	Credit (₦)
Cash	30,000
Bank	20,000
Stock	18,000
Purchases	50,000
Debtors	25,000
Rent	6,000
Wages	10,000
Electricity	3,000
Sales		85,000
Creditors		22,000
Capital		55,000
Total	162,000	162,000

Since the total debit balances equal the total credit balances, the trial balance of Success Stores is said to balance, proving arithmetic accuracy in the ledger accounts.

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Summary

1. A trial balance is a list of all ledger account balances at a particular date.


2. It is prepared to check the accuracy of the ledger postings.


3. The total of debit balances must equal the total of credit balances.


4. It serves as the foundation for preparing final accounts.


5. It helps you to detect arithmetic errors but not all types of errors.


6. The two most common forms are the horizontal and vertical formats.