Trial balance is the listing for all the balances obtained from general ledgers; it’s an ending balance obtained from the general ledger and used to prepare the financial statement. It acts as a point of control where debit and credit balances can be analyzed to ensure balances are equal and can be used to prepare the financial statement.
Difference between trial balance and balance sheet
The trial is used as source data in the preparation of the financial statement. It’s a list of account balances mapped in order of assets, liability, equity, revenue, and expenses, depending on their nature. Once the mapping is done, financial statements are checked to see if they are accurate and free from error.
Difference between trial balance and profit and loss account
Trial balance is a complete listing of accounts/chart of accounts. These balances are used in the preparation of the financial statement. On the other hand, the profit and loss account is a structured presentation of the revenue and expenses that glance at the profit/loss during a certain accounting period.
Uses of trial balance
Following are some of the advantages.
- It helps to verify that total debits and credits of the account balance are equal.
- Auditors and management use trial balances to adjust the balances.
- It’s used in the construction of balance sheets and income statements.
- Adjusting entries are posted in the trial .
Trial balance is the listing of closing balances in the financial statement. It’s a source document for the preparation of the financial statement and acts as an important document for the accounting department. If debit and credit of the trial are not equal, the best practice is not to prepare the financial statement.
Further, trial can be used as a source document to analyze if there is some problem with the accounting record. So, it can be tracked and corrected.
Also read, analyze a business transaction.