After performing the process of posting into the General Ledger and Subsidiary Ledgers and the balancing of the accounts, then the accounts are combined with their respective balances by preparing a statement called the Trial Balance.

Trial Balance

A statement that contains all accounts with their final debit and credit balances, and which are obtained from the General Ledger. It is a condition that the sum of the debit side be equal to the sum of the credit side in order to consider its validity in terms of balance.

The importance of preparing the Trial Balance:

1. Ensuring the balancing of accounts and detecting the errors that affect its balance to be corrected before preparing the financial statements.
2. Providing a summary on the account balances during a certain period of time, in a way that benefits decision makers of the company. Preferably, the trial balance should be prepared at the end of every month.
3. The trial balance is considered the starting point for preparing the financial statements.

Methods of Preparing the Trial Balance

There are three methods of preparing the trial balance, as following:

Balances Method

It is a statement that lists the account balances that are already recorded in the General Ledger, takes the following form:

Totals Method

It is a statement that lists total debit and credit movements occurring for each of the General Ledger Accounts, and takes the following form:

Total and Balance method

It is a statement that lists debit and credit totals, the debit and credit balances for each of the General Ledger accounts.