Preparing Trial Balance From Journal and Ledger (How To)

To prepare a trial balance, first, we need to know make sure the transactions are journalized and have been posted to ledgers.

The final balance from the ledger needs to be properly placed on the debit and credit column while preparing the trial balance, to make sure the accounting process is correct.

How to Prepare a Trial Balance

Business transactions are first recorded in the journal and thereafter these are posted in the ledger under different heads of accounts.

It may be mentioned that transactions may directly be posted in the ledger accounts without recording them in the journal.

At the end of a particular accounting period, a trial balance is prepared in a separate sheet of prescribed form recording debit ledger balance, in debit column and credit ledger balances in credit money column.

Besides ledger balances, cash balance and bank balance of cash book of that particular date are also included in the trial balance.

Thereafter total of debit and credit money columns of a trial balance is calculated. Agreement of trial balance is the conclusive evidence of the accuracy of the ledger and trial balance.

Format for Preparing Trial Balance

A short description of the format of the trial balance is given below:

Preparing Trial Balance From Journal and Ledger

  1. Titles: In the middle of the format name of the company, trial balance and date of preparation are written.
  2. Accounts serial number: In this column, the serial numbers of ledger accounts are written.
  3. Account Titles: The serial number of that account of the ledger which has been written in the first column, the full title of that account is written in this column. For example, Capital account, Furniture account, Cash account etc.
  4. Ledger Folio: The number of the ledger page from where ledger balances are brought is written in this column.
  5. Debit balance: All debit balances of ledger accounts are written in this column.
  6. Credit balance: All credit balances of ledger accounts are written in this column.

Ledger Account Balance and Trial Balance

Rules for recording debit ledger account balances and credit ledger account balances in debit money column and credit money column of trial balance in absence of ledger account:

Ledger account balances to be recorded in debit money columnLedger account balances to be recorded in credit money column
1. All assets

Land, building, leasehold property, machinery, furniture, investment, notes receivable, accounts receivable, cash, stock, goodwill, patents, trademarks, etc..

1.External liabilities:

The loan, mortgage loan, accounts payable, notes payable, debenture, bank overdraft, etc..

2. All expenses:

Wages expense, salary expense, supplies expense, advertisement expense, rent expense, repair expense, interest expense, commission expense, depreciation expense, bad debt expense, discount expense, Items for which payment is made: Owner’s goods withdrawal, merchandise purchase.

2. All incomes:

Rent revenue, discount income, interest income, apprentice ship premium income etc..

4. Prepaid expense

Prepaid insurance, prepaid rent, prepaid advertisement, salary advance etc..

3. Expense payable:

Salaries payable, rent payable.

5, Accrued income:

Interest on investment accrued, interest on bank balance accrued, interest accrued on notes receivable and accounts receivable.

 

4. Unearned income:

Unearned rent, unearned premium, etc..

5. Losses:

Cash lost, goods lost etc.

 

5. All types of reserves and provisions:

General reserve, provision for doubtful debts. Provision for discount on accounts receivable, etc..

 

6. Other items:

Sales return, reserve for, discount on accounts payable.

6. Other items

Purchase return, capital, bad debt recovered.

Important to remember:

  1. Opening cash and bank balance are not shown in the trial balance as these are included in closing cash and bank balances.
  2. Closing stock is not shown in the trial balance because this remains included with opening stock and purchase of the accounting year.But if opening stock and purchase remain absent in trial balance and adjusted purchase is shown in the trial balance, in that case, the closing stock is shown in the debit money column of the trial balance.
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