In this article, we will learn in-depth about the difference between trial balance and balance sheet.
The Trial Balance and the Balance Sheet or statement of financial position are the two most important stages in the accounting cycle. A closer examination of these two subjects shows significant differences.
The differences between Trial Balance and Balance Sheet or statement of financial position are discussed below:
Trial Balance Vs Balance Sheet
1.Definition:
A Trial Balance is a list or statement prepared to check the mathematical accuracy of the account with the balances of the ledger of any particular day.
While Balance Sheet or statement of financial position is a statement prepared at the end of the accounting year to know the actual financial condition of the business on that day.
2. Objective:
One of the main objectives of making a trial balance is to verify the mathematical accuracy of ledger accounts.
On the other hand, the main objective of making a balance sheet is to know the actual financial condition of an organization.
3. List of accounts
The trial balance lists the debit and credit balances of the ledger accounts.
While balance sheet or statement of financial position lists the assets, liabilities, and ownership of the organization.
4. Format
The trial balance’s format has to be made like a journal.
On the other hand, the format of the balance sheet has to be made like a ledger. In modern times, a balance sheet is prepared in the form of a statement.
5. Part of financial Statements
Trial balance is not a part of the financial statements.
while the balance sheet is a part of the financial statements.
6. In order
It is not mandatory to write the ledger account balances in order in the trial balance.
But it is required to write the assets and liabilities accounts in the financial statements in order.
7. Preparation
The trial balance is prepared after the ledger and before the financial statement is prepared.
While the statement of financial condition or balance sheet is prepared after the statement of production cost, income statement, and the statement of retained income.
8. Scope
The scope of the trial balance is limited.
While the scope of financial statements is wide.
9. Accounts Balances
In Trial Balance, the ledger accounts balances are written side by side in the debit and credit columns.
On the other hand, according to the prevailing rules, capital and liabilities accounts balances are written on the left side of the financial statements, and assets accounts are written on the right side.
10. Types of accounts
Trial balance is prepared with the balance of all types of accounts.
While the statement of financial condition or balance sheet is prepared with the balance of assets, liabilities, and capital.
11. Necessity
The trial balance is not saved because it is not important after preparing the financial statements.
On the other hand, the balance sheet is saved as an essential document for an organization.
12. Mandatory
It is not mandatory to create a Trial balance.
But it is mandatory to create a balance sheet to know the financial condition of an organization.
13. Signature of the Auditor
The signature of the auditor is not required to prove the accuracy of the Trial balance.
On the other hand, the signature of the auditor is required to prove the accuracy of the liabilities and capital presented in the statement of financial position or balance sheet.
14. Capital and Revenue accounts
In Trial balance, both capital and revenue accounts are written.
While in the statement of financial position or balance sheet, only capital accounts are written.
15. Submit to the Registrar
A copy of the Trial balance is not required to be submitted to the Registrar.
On the other hand, an audited copy of the balance sheet must be submitted to the Registrar.
You can also read:
- Trial Balance-Meaning, Features and Importance
- What is the Concept of Suspense Account in Trial Balance?
- Top Short Questions and Answers-Trial Balance
