Top 2 Methods of Preparing Trial Balance (With Specimen) (2024)

Read this article to learn about the following two methods of preparing trial balance, i.e., (1) Total Method and (2) Balance Method.

1. Total Method:

In this method, ledger accounts are not balanced. They are totaled. These totals are entered in the debit and credit columns. The grand total of debit column will be equal to the total of the credit column.

The format of a Trial balance under this method is as follows:

2. Balance Method:

Under this method, the closing balances of ledger accounts are tabulated in a separate statement. The brought down balances are brought to this statement.

All debit balances are shown in the debit column and all credit balances in the credit column. This method is more commonly used one.

The format of Trial balance under this method is as follows:

Important Note:

All debtors’ accounts, Assets or Properties accounts, all expenses or losses accounts will always show debit balances. They will be shown in the debit side/column of the trial balance.

All creditors’ accounts, Liabilities’ accounts, Income or gains accounts will always show credit balances. They will be shown in the credit side/column of the, trial balance.

Illustration 1:

Journalize the following transactions and prepare necessary ledger accounts and verify the arithmetical accuracy of the ledger accounts:

Solution:

To verify the arithmetical accuracy of ledger accounts, the trial balance should be prepared.

Illustration 2:

Arun commenced business with Rs.30, 000 cash and Rs. 10,000 furniture. Sales amounted to Rs. 1,32,000 including Rs.32,000 cash sales and Rs.20,000 sales were outstanding at the end of the year.

Purchases amounted to Rs. 70, 000 including Rs. 16,000 cash purchases and Rs. 40,000 has been paid to creditors. Salaries paid amounted to Rs. 8, 000. Drawings were Rs. 12,000.

Machinery was purchased for Rs. 24, 000 out of which Rs. 8,000 has been paid. Prepare Trial Balance.

Solution:

Workings:

Total value of machinery Rs. 24, 000 less cash paid Rs. 8, 000 will be Creditors for machinery i.e., Rs. 16,000.

Illustration 3:

From the following ledger balances, prepare Trial balance:

Opening Stock Rs. 30,000; Purchases Rs. 3,00,000; Closing Stock Rs. 14,000; Debtors Rs. 1,20,000; Cash Rs. 3,000; Discount allowed Rs. 3,400; Bank Rs. 5,600; Creditors Rs. 90,000; Sales Rs. 4,20,000; Salaries Rs. 42,000; Rent Rs. 9,000; Postage Rs. 4,500; Taxes Rs. 1,500; Machinery Rs. 1,20,000; Drawings Rs. 20,000; Capital Rs. 1,52,000; Purchase Returns Rs. 6,000; Sales Returns Rs. 9,000.

Solution:

Note:

Closing Stock is not included in the above trial balance because it is an item of adjustment and its value is ascertained only after closing the ledger accounts.

Illustration 4:

The following Trial balance contains certain obvious errors. Point out the errors and prepare a correct Trial balance.

Solution:

The following credit balances have been shown in the debit column:

Purchases Returns, Outstanding expenses, Bank overdraft, Discount Received, and Loan from Chaco. These items should be shown in the credit column.

The following debit balances have been shown in the credit column: Sales Returns, Carriage Outwards. They should be shown in the debit column.

Closing Stock, being an adjustment item, should not be shown in the trial balance.