Procedure for Preparing a Trial Balance [Notes with PDF]
In this article, we will learn in-depth about the procedure for preparing a trial balance, and much more.
How to Prepare a Trial Balance?
General rules for preparing the trial balance are:
All Assets and Expenses are———Debit
All Liabilities and Incomes are——Credit
So if you want to prepare the trial balance, you need to know which accounts are expenses, income, assets, liabilities, and which of the account balances will be entered in the debit column and which will be entered in the credit column of the trial balance.
The following rules should be followed to determine which of the ledger balances will be entered in the debit column and which will be entered in the credit column of the Trial Balance.
1. The Ledger Balances which are written on the “debit side” of the trial balance
1.1.All the Assets
- Land
- Building
- Furniture
- Plant and Machinery
- Vessels
- Vehicles
- Delivery Van
- Cash in Hand
- Cash at Bank
- Closing Stocks
- Opening stocks
- Leased Assets
- Copyright
- Trademark
- Goodwill
- Preliminary Expenses
- Sales Ledger Balance or Sundry Debtors or Accounts Receivables
- Bills Receivable
- Investment
- Saving Certificate of Govt. securities
- Motor Car
1.2. All the Expenses or Losses
- Salary
- Wages
- Rent
- Stationary
- Advertisement
- Insurance
- Repair and Maintenance
- Administrative Expenses
- Commission
- Carriage Inward
- Carriage Outward
- Purchases
- Traveling Expenses
- Marketing Expenses
- Telephone Bill
- Audit Fees
- Remuneration
- Paid Discount
- Tax and Duty
- Electricity Bill
- Postage and telegram
- Bank Charges
- Interest on Bank Overdraft
- Paid Interest
- Bad debts
- Sundry Expenses
- Depreciation
You can also read factors to be considered in preparing the Trial Balance
1.3. Expenses Paid in Advance
- Advance Rent
- Advance
- Salary
- Advance Insurance
- Advance Commission
- Deferred Advertisement
- Deferred Stationary
1.4. Accrued Incomes
- Accrued interest on investment
- Accrued Commission
- Accrued Interest
- Accrued interest on Bank balances
- Accrued Sub-tenant Rent
1.5. Other Items
- Drawings
- Sales Return
- Paid Loan
- Paid VAT
- Income Tax
- Life Insurance
2. The Ledger Balances which are written on the “Credit side” of the trial balance
2.1. All Liabilities
- Bank Overdraft
- Purchase Ledger Balance or Sundry Creditors or Accounts Payables or Creditors
- Bills Payable
- Loan
- Mortgage Loan
- Capital
- Additional Capital
- Unclaimed Dividend
2.2. All Incomes and profit
- Sales
- Interest received
- Interest on Investment
- Interest on Bank Deposit
- Interest on Fixed Deposit
- Interest on Savings Certificate
- Interest on Drawings
- Dividend received
- Commission Received
- Rent Received
- Rent Received from sub-Tenant
- Share Transfer Fees
- Profit from Consignment
- Bad Debts Recover
- Discount Received
- Apprenticeship Premium
2.3. Outstanding Expenses and Unearned Incomes
- Accrued Salary
- Accrued Rent
- Accrued Wages
- Accrued Business Expenses
- Accrued Interest
- Accrued Commission
- Due Telephone bill
- Due Stationery
- Advance Rent Received
- Advance Commission Received
- Advance Apprenticeship premium
2.4. All the Reserves
- General Reserve
- Capital Reserve
- Reserve for Doubtful debts
- Reserve for Discount on Debtors
- Income Tax Reserve
- Provision Fund
- Insurance Fund
- Dividend Equalization Fund
- Investment Reserve Fund
- Depreciation Fund
- Sinking Fund
2.5. Other Items
- Purchase Return
- Capital
- Additional Capital
You may also read:
Key takeaways
- Balance every ledger account.
- List each account name and its balance, in the debit column if it has a debit balance or the credit column if it has a credit balance.
- Total both columns.
- Compare the totals. If they differ, investigate before going further.
Normal balances: assets and expenses are usually debit. Liabilities, equity (capital) and revenue are usually credit.
Quick check
1. On which side does each normally have its balance: cash, loan payable, sales, rent expense?
Cash: debit. Loan payable: credit. Sales: credit. Rent expense: debit.
2. The debit column totals 30,500 and the credit column totals 30,000. What is the difference and what should you check?
The difference is 500. Recheck the additions, look for a balance in the wrong column, or an entry posted to only one side.
Frequently asked questions
Which accounts appear in the debit column?
Accounts with debit balances, normally assets, expenses and drawings.
How can I spot a transposition error?
A difference that is exactly divisible by 9 often points to digits swapped when copying a number, for example 45 written as 54.
Should the owner’s capital be included?
Yes. The capital account is a ledger account with a credit balance, so it appears in the credit column.
Related: Trial balance (glossary) · Suspense account · Ledger
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