Accounting explained
Trial Balance: Meaning, Format and Example
A trial balance is a list of every ledger account with its closing balance, debits in one column and credits in the other. If the two columns add up to the same figure, the double entry has been done arithmetically right, and the accounts are ready for the profit and loss statement and balance sheet.
Why it is prepared
Because every transaction is recorded with equal debits and credits, the total of all debit balances must equal the total of all credit balances. The trial balance checks that, and it gathers the figures from which the final accounts are drawn. Accountants usually prepare it monthly and always at year end.
Worked example: Sri Lakshmi Stores at 31 March 2026
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Capital (opening, 1 April 2025) | 3,60,000 | |
| Drawings | 2,40,000 | |
| Sales | 48,00,000 | |
| Opening stock | 2,70,000 | |
| Purchases | 38,20,000 | |
| Rent | 2,40,000 | |
| Salary | 2,16,000 | |
| Electricity | 48,000 | |
| Phone and internet | 12,000 | |
| Packing and sundry expenses | 24,000 | |
| Depreciation | 30,000 | |
| Fixtures, computer and printer (cost) | 2,00,000 | |
| Accumulated depreciation | 30,000 | |
| Sundry debtors | 1,20,000 | |
| Sundry creditors | 1,80,000 | |
| GST payable | 25,000 | |
| Bank | 1,60,000 | |
| Cash | 15,000 | |
| Total | 53,95,000 | 53,95,000 |
Closing stock of ₹3,30,000, counted on 31 March 2026, is given as an adjustment below the trial balance and taken into the final accounts.
Which side each balance sits on
- Debit balances: assets (cash, bank, debtors, stock, fixed assets), expenses and losses, purchases, drawings
- Credit balances: liabilities (creditors, GST payable, loans), capital, income and gains, sales, accumulated depreciation
- A balance on the "wrong" side is a warning sign, for example a credit balance in Cash
Errors a trial balance cannot find
| Error | Example | Why totals still agree |
|---|---|---|
| Omission | A ₹4,000 electricity bill never entered | Neither side was recorded |
| Commission | ₹5,000 received from Vidya PG Hostel posted to Annapoorna Mess | Right side, wrong customer |
| Principle | A ₹50,000 computer recorded as an expense | Debit is still a debit |
| Compensating | ₹1,000 too much in Rent and ₹1,000 too much in Sales | The errors cancel |
| Original entry | A ₹2,340 bill entered as ₹2,430 on both sides | Both sides are equally wrong |
When it does not balance
- Check the totals of each column again
- If the difference is divisible by 9, look for transposed digits such as 54 entered as 45
- If the difference is double an amount, a balance is probably on the wrong side
- Look for an amount equal to the difference that was posted on one side only
- Park any unexplained difference in a suspense account only while you look for it, never permanently
Unadjusted and adjusted trial balance
An unadjusted trial balance is taken straight from the ledger before year-end adjustments. An adjusted trial balance comes after entries for depreciation, accruals, prepayments and similar items. The one above for Sri Lakshmi Stores is adjusted: depreciation of ₹30,000 is already in it. From the adjusted trial balance, every nominal account (sales, purchases and expenses) goes to the P&L, and every real and personal account (assets, liabilities, capital) goes to the balance sheet.
Accountants also speak of a post-closing trial balance, taken after closing entries, which contains only balance sheet accounts. Its total for the store would be the balance sheet total adjusted for accumulated depreciation, and it becomes the opening position for the new year.
Key terms on this page
- Ledger balance: the difference between an account's debits and credits
- Suspense account: a temporary account for amounts that cannot yet be classified
- Rectification: correcting an error with a new entry rather than by erasing
About the worked example
The examples on our accounting pages follow one shop through one year: Sri Lakshmi Stores, a kirana in Mysuru owned by Ramesh, for the financial year 2025-26. It sold ₹48 lakh of goods (before GST), made a gross profit of ₹10.4 lakh and a net profit of ₹4.7 lakh, and ended the year with a balance sheet total of ₹7.95 lakh. The figures are illustrative but they add up across every page, so you can follow one transaction from the journal to the balance sheet.
How TripleBill handles it
TripleBill keeps real double-entry books under every document, so its trial balance always balances (Starter and Pro). Open it for any date from the reports; a suspense account report shows anything waiting to be classified.
General information on bookkeeping, not accounting or tax advice. For your final accounts and filings, consult a chartered accountant.
Last reviewed
Last reviewed: November 2026.
- Reference: ICAI Foundation course study material on the trial balance and rectification of errors
Frequently asked questions
What is a trial balance?
A statement listing every ledger account with its debit or credit balance on a date, used to check that total debits equal total credits.
Is a trial balance a financial statement?
No. It is a working statement used to prepare the profit and loss statement and the balance sheet.
Where does closing stock go?
Usually outside the trial balance as an adjustment, because it is counted after the books are closed. Some systems record it through a journal first, and then it appears inside.
Why does drawings have a debit balance?
Drawings reduce capital, which has a credit balance, so they sit on the opposite, debit, side.
If my trial balance agrees, are my books correct?
Not necessarily. Omissions, wrong accounts and compensating errors all leave the totals equal.
How often should I prepare one?
Monthly is good practice; at least at year end before the final accounts.
Does software make the trial balance unnecessary?
No. Software keeps it balanced arithmetically, but you still review it for wrong-side balances, odd figures and suspense items before preparing final accounts.
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