The trial balance is a report run at the end of an accounting period , listing the ending balance in each general ledger account. The report is primarily used to ensure that the total of all debits equals the total of all credits, which means that there are no unbalanced journal entries in the accounting system that would make it impossible to generate accurate financial statements. There are a number of differences between the general ledger and trial balance, which are as follows:.
Amount of information. The general ledger contains the detailed transactions comprising all accounts , while the trial balance only contains the ending balance in each of those accounts. Thus, the general ledger may be several hundred pages long, while the trial balance covers only a few pages. Cookies help us provide, protect and improve our products and services. By using our website, you agree to our use of cookies Privacy Policy. A general ledger is defined as a book of accounts.
A trial balance is a listing of the accounts and balances of each of the accounts in the general ledger. A General Ledger of an organization is the record containing all its assets, revenue, liability, expense, gain, and loss accounts with the amount in respective accounts. They are prepared for classifying different accounts like assets, liabilities, etc.
It is prepared to check the arithmetic accuracy of the total of debit and credit balance derived from General Ledger. Classification of types along with examples. There are broadly seven classifications of the general ledger.
Assets like Cash, Accounts Receivable Accounts Receivable Accounts receivables refer to the amount due on the customers for the credit sales of the products or services made by the company to them. It appears as a current asset in the corporate balance sheet. Liabilities like Loans Payable, Accounts Payable Accounts Payable Accounts payable is the amount due by a business to its suppliers or vendors for the purchase of products or services.
It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting period. There are several methods to earn revenue, but operational revenue is earned by the core business activities that the organization undertakes in its daily operations. Therefore, they are readily available in the income statement and help to determine the net profit.
Non-operating revenues and gains like Investment Income Investment Income Investment income is the earnings made from allocating funds in financial instruments or assets like securities, mutual funds, bonds, property, etc. Login details for this Free course will be emailed to you. Email ID. Contact No. There is no formal nomenclature that is used for Trial Balance which is generally used. Accountants of the company use ledger balances while they are investing in the accounts.
Individual asset accounts such as cash, accounts receivables , prepayments , etc. For large scale businesses where many transactions are conducted, it may not be convenient to enter all transactions in the general ledger due to the high volume. The trial balance is a summarized worksheet which includes all ledger balances as at a particular point of time usually the accounting year-end with the intention of checking the mathematical accuracy of the ledger balances.
All the debit balances will be recorded in one column with all the credit balances in another. Trial balance provides all the ending balances in a single document at a glance, therefore, it is easy to use as a reference tool. It also assists in disclosing a number of possible errors in case of occurrence and helps to identify the type of journal entries that should be posted in order to correct the identified errors.
If all the transactions for an accounting period are accurately recorded, the sum of the debit balances of the trial balance should be equal to the sum of the credit balances. Certain type of errors in the general ledger can be identified through the trial balance.
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