Financial Accounting · Double-entry bookkeeping principles including the maintenance of accounting records

Trial Balance and Preparing Accounts from Ledgers

Updated 11 October 2026 · Fact-checked

A trial balance is a list of all ledger account balances, split into debit and credit columns, at a set date. You balance each ledger account, copy the balances across, and total both columns. If the totals match, the double entry is arithmetically consistent. It does not prove the figures are right.

Understand Trial Balance and Preparing Accounts from Ledgers

Every transaction is recorded twice in the ledgers: one debit and one credit of equal amount. So, across all ledger accounts, total debits must equal total credits. The trial balance is the check on this.

To build one, you first balance off each ledger account. Add up both sides, find the difference, and carry it down as the balance. A balance on the debit side is a debit balance. A balance on the credit side is a credit balance. Then you list each balance in the debit or credit column of the trial balance.

Assets and expenses normally have debit balances. Liabilities, capital (equity) and income normally have credit balances. Drawings and inventory at the start of the period are debits. Allowances for receivables and accumulated depreciation are credits.

The trial balance is also the starting point for the financial statements. Income and expense balances go into the statement of profit or loss. Asset, liability and equity balances go into the statement of financial position. Adjustments (such as closing inventory, accruals and depreciation) are made first.

A trial balance that agrees only shows total debits equal total credits. Some errors leave the totals equal, so they stay hidden. A trial balance that does not agree shows at least one error. The difference is often put in a suspense account until the error is found.

Key formulas to remember

Balancing a ledger account: Balance c/d = larger side total − smaller side total; Put the balance c/d on the smaller side so both sides total the same. Bring it down (b/d) on the opposite side.
Trial balance rule: Total debit balances = Total credit balances; Holds only if every entry has equal debits and credits and all balances are listed correctly.
Accounting equation: Assets = Capital + Liabilities; Explains why debits equal credits: every transaction keeps the equation in balance.
Errors not revealed (memory list): Omission, Commission, Principle, Original entry, Compensating, Reversal; Each leaves total debits equal to total credits, so the trial balance still agrees.
Normal balances: Debit: assets, expenses, drawings. Credit: liabilities, capital, income.; Contra items reverse this: allowance for receivables and accumulated depreciation are credits.

How to solve Trial Balance and Preparing Accounts from Ledgers questions

Use this method for any question that asks you to balance accounts, extract a trial balance or move to financial statements.

1Read what is asked: a balance, a trial balance total, a suspense figure or a statement figure.
2Total each side of the ledger account, including any opening balance.
3Subtract the smaller total from the larger. Put the difference on the smaller side as balance c/d, then bring it down on the other side.
4Decide whether each balance is a debit or a credit. The side with the larger total gives the balance's nature.
5List the balances in two columns. Check unusual items such as drawings, allowance for receivables and accumulated depreciation.
6Total both columns. If they differ, the difference goes to suspense (or you hunt for the error).
7For financial statements, split the balances: income and expenses to profit or loss, the rest to the statement of financial position, after adjustments.

Quickest way: Fast trial balance check

When to use it: Use this for number-entry or multiple-choice questions that give a list of balances and ask for a missing figure or total.

Sort the listed balances into debits and credits first.
Add each column separately.
The missing figure is the difference, placed on the smaller column's side.
If the question mentions a suspense account, the suspense balance equals the trial balance difference.
For error questions, ask: does the error put an unequal debit and credit into the ledgers? If yes, the trial balance is out. If no, it still agrees.

Common mistakes in Trial Balance and Preparing Accounts from Ledgers

Putting a balance in the wrong column
Students guess from the account name instead of the side with the larger total.
Fix: Look at which side of the account is larger. That side gives the debit or credit balance.
Treating accumulated depreciation or allowance for receivables as debits
They sound like assets or expenses.
Fix: These reduce assets, so they carry credit balances.
Saying an agreeing trial balance proves the accounts are correct
Agreement feels like proof.
Fix: State that it proves only arithmetic equality of debits and credits. Omission, commission, principle, original entry, compensating and reversal errors remain possible.
Counting a reversal of entries as a trial balance error
The entries look wrong, so students assume the totals differ.
Fix: If the debit and credit are swapped but equal, the totals still agree. It is a hidden error.
Forgetting the opening balance when balancing
The balance b/d is on one side and is easy to skip.
Fix: Include the opening balance in the total of its side before finding the difference.
Putting the balance c/d on the wrong side
Students put it on the larger side.
Fix: The balance c/d goes on the smaller side so both totals match. The balance b/d then sits on the opposite side.

Worked examples

Example 1

A receivables account shows: opening balance ₹40,000 (debit); credit sales ₹1,10,000 (debit); cash received ₹95,000 (credit); sales returns ₹5,000 (credit). Find the closing balance and state whether it is a debit or credit.

Show the solution

Debit side total: ₹40,000 + ₹1,10,000 = ₹1,50,000.
Credit side total: ₹95,000 + ₹5,000 = ₹1,00,000.
Difference: ₹1,50,000 − ₹1,00,000 = ₹50,000.
The debit side is larger, so the balance is a debit. Balance c/d ₹50,000 goes on the credit side and is brought down on the debit side.

Answer: Closing balance is ₹50,000 debit.

Example 2

A trial balance has total debits of ₹8,42,000 and total credits of ₹8,27,000. The difference is put in a suspense account. Later it is found that discount received of ₹15,000 was omitted from the credit side only. State the suspense balance and the effect of correcting the error.

Show the solution

Debits exceed credits by ₹8,42,000 − ₹8,27,000 = ₹15,000.
To make the totals agree, a credit of ₹15,000 is placed in suspense.
The error: the debit side of the discount transaction was posted, but the ₹15,000 credit to discount received was not. This is a single-sided entry, so the trial balance was out by ₹15,000.
Correction: debit suspense ₹15,000 and credit discount received ₹15,000.
Suspense is cleared to nil. Discount received is income, so it increases by ₹15,000 and profit increases by ₹15,000.

Answer: Suspense is a ₹15,000 credit balance. The correction (debit suspense, credit discount received ₹15,000) clears it and raises profit by ₹15,000.

Exam tips

Objective questions often ask which error would not stop the trial balance agreeing. Check whether the debit and credit amounts stay equal.
For missing-figure questions, total each column carefully and place the difference on the smaller side.
Know the normal balance of every common account, especially contra accounts and drawings.
In multiple response questions, select exactly the stated number of options. Do not add extra ones.
When the question asks for the effect on profit, work out whether income or expense changes and by how much.

Practice questions from Double-entry bookkeeping principles including the maintenance of accounting records

Trial Balance and Preparing Accounts from Ledgers in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Trial Balance and Preparing Accounts from Ledgers: frequently asked questions

How do I prepare a trial balance?

Balance every ledger account, then list each balance in the debit or credit column. Total both columns. If they are equal, the double entry is arithmetically consistent.

How do I balance off a ledger account?

Total both sides, subtract the smaller from the larger, and put the difference on the smaller side as balance c/d. Bring it down on the opposite side as balance b/d.

What errors does a trial balance not reveal?

It does not reveal errors of omission, commission, principle, original entry, compensating errors or reversal of entries. In each, total debits still equal total credits.

What are the steps from trial balance to financial statements?

Make the adjustments first, such as closing inventory, depreciation, accruals and prepayments. Then take income and expenses to the statement of profit or loss, and assets, liabilities and equity to the statement of financial position.