Meaning Of Trial Balance – All the businessmen after completion of postings from Journal or Subsidiary Books to the Ledger, want to verify accuracy of the posting. For this purpose, a statement is prepared wherein the balances of all the accounts in the Ledger are incorporated. The statement so prepared is called Trial Balance. Trial Balance is that under the double entry system ,each transaction is recorded two times. Accounts showing debit balances are put on the debit side of the trial balance and the accounts showing credit balances are put on its credit side. If the total of the debit side of the trial balance is equal to that of its credit side , it is presumed that the posting to the ledger is accurate .
Meaning Of Balance Sheet – After ascertaining the net profit or loss of the business enterprise, the businessman would also like to know the exact financial position of his business . For this purpose a statement is prepared which contains all the Assets and Liabilities of the business enterprise. The statement so prepared is called a Balance Sheet.
Definitions of Trial Balance – According to Carter, Trial Balance is the list of debit and credit balances, taken out from ledger. It also includes the balances of cash and bank taken from cash book. The objective of the trial balance is to test the arithmetical accuracy of the books.
Definitions of Balance Sheet – According to J.R. Batliboi, A Balance Sheet is a statement prepared with a view to measure the exact financial position of a business on a certain fixed date.
Difference Between Trial Balance And Balance Sheet
Basis of Difference
|Trial Balance||Balance Sheet|
|Object||It is prepared to check the arithmetical accuracy of the books of accounts.||It is prepared to know the true financial position of the firm.|
|Information about profit or loss||It is not possible to have information about net profit or net loss from a trial balance.||Since net profit or loss is recorded in the Capital shown in Balance Sheet, it is possible to have the information about net profit or net loss from a Balance Sheet.|
|Necessity||Though desirable , its preparation is not necessary.||It is necessary to prepare a Balance Sheet.|
|Headings||The headings of its two columns are debit and credit.||The headings of its two sides are assets and liabilities.|
|Period||It is normally prepared every month or whenever needed.||It is normally prepared half – yearly or yearly at the end of the accounting period.|
|Types of Accounts||All types of accounts whether personal, real or nominal must be written in it.||Only personal and real accounts are included in it.|
|Closing Stock||Normally, it does not contain the item of Closing Stock.||It contains the item of Closing Stock.|
|Adjustments||It can be prepared without adjusting for outstanding expenses, prepaid expenses, accrued incomes etc.||It cannot be prepared without making adjustments for outstanding expenses, prepaid expenses, accrued incomes etc.|
|Evidence||It is not accepted by the court as documentary evidence.||
It is accepted by the court as documentary evidence. It is also helpful while making payment of income tax and Value Added Tax (VAT).
Conclusion – There are significant differences between trial balance vs balance sheet. But trial balance and balance sheet are always connected to each other. Even if the trial balance is prepared just for internal use and to see whether the transactions are accurately recorded or not, without trial balance, balance sheet couldn’t be recorded properly.
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