Rules and Examples of Trial Balance

Rules to prepare the Trial balance
Steps to prepare Trial balance
Specimen of Trial balance
Example of Trial Balance

A trial balance is a conglomerate of or list of debit and credit balances extracted from various accounts in the ledger including cash and bank balances from cash book. The rule to prepare trial balance is that the total of the debit balances and credit balances extracted from the ledger must tally. Because every transaction has a dual effect with each debit having a corresponding credit and vice versa.

Therefore, at the end of the accounting period or at the end of each month, the balances of the ledger accounts are extracted, and trial balance is prepared to test as to if the total debits are equal to total credits or not.

Rules to prepare the Trial balance

The rule to prepare the Trial balance is an equation which is as follows:

Total Debit Entries = Total Credit Entries

Debit

Credit

All Assets (Cash in hand, Cash at Bank, Inventory, Land and Building, Plant and Machinery etc.)
Sundry Debtors
Expenses (Carriage Inward, Freight, Rents, rebates and rates, Salary, Commission etc.)
Purchases
Losses (Depreciation, Return inwards, Profit and loss A/c (Dr.), Bad debts etc.)

All liabilities (Bank Overdraft, Secured and unsecured loans, bills payable, Outstanding Payables or expenses, Loan on mortgage etc.)

Sundry Creditors
Reserve fund, general reserve, provision for depreciation, Accumulated depreciation etc.,
Sales

Gains (Discount received, Return Outwards, Bad debts recovered, Profit and loss A/c (Cr) etc.)

Steps to prepare Trial balance

The following are the steps to prepare Trial Balance.

Step 1	Cast/ Balance all the ledger accounts in the books.
Step 2	List all the Debit balances on the debit side and sum them up.
Step 3	List all the Credit balances on the credit side and sum them up.
Ideally, the Trial Balance should Tally at Step 3.

Specimen of Trial balance

Trial Balance of XXX Ltd as at ______

SI No	Particulars	L.F	Amount Rp DR	Amount Rp CR

Example of Trial Balance

____ Ltd Trial Balance 31- Dec 2018 (in Dirham)

Accounts	Debit	Credit
Cash	1,02,280	-
Accounts Receivable	7,500	-
Office Expenses	2,500	-
Prepaid Rent	600	-
Prepaid Insurance	120	-
Office furniture and equipment	15,000	-
Bank loan	-	15,000
Accounts Payable	-	5,000
Unearned Revenues	-	7,500
Capital	-	1,00,000
Drawings	3,000	-
Commission Revenue	-	12,500
Salary Expenses	9,000	-
Total	1,40,000	1,40,000