Difference between Trial Balance and Balance Sheet

Difference between Trial Balance and Balance Sheet

Difference between Trial Balance and Balance Sheet

Trial balance is an account which shows debit balances and credit balances of all accounts in the ledger. It is a statement of all debits and credits in a double-entry account book, with any disagreement signifying a fault. Balance Sheet is a tabular report of balances carried further after closing the books of account reserved according to principles of accounting. It is a statement arranged with a view to determining the financial situation of a business on a definite fixed date.

Trial balance

  • Objective: To know the arithmetical accuracy of the accounting work.
  • Format: The columns are debit balances and credit balances.
  • Content: It is a summary of all the ledger balances – personal, real and nominal accounts.
  • Stage: It is the middle stage in the preparation of accounts.
  • Period: It can be prepared periodically, say at the end of the month, quarterly or half yearly, etc.
  • Preparation: It is prepared before the preparation of trading, profit and loss account.
  • Stock: It shows opening stock only.
  • Order: Balances shown in the trial balance are not in order.
  • Evidence: It cannot be produced as documentary evidence in the court.
  • Compulsion: Preparation of trial balance is not compulsory.

Balance Sheet

  • Objective: To know the true and fair financial position of a business.
  • Format: The two sides are assets and liabilities.
  • Content: It is a statement showing closing balances of personal & real accounts.
  • Stage: It is the last stage in the preparation of accounts.
  • Period: It is generally prepared at the end of the accounting period.
  • Preparation: It is prepared after the preparation of trading, profit and loss account.
  • Stock: It shows closing stock only.
  • Order: Balances shown in the balance sheet must be in order.
  • Evidence: It can be produced as documentary evidence.
  • Compulsion: Preparation of the balance sheet is a must.

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