Skip to content

Fundamentals of Financial and Cost Accounting · Trial Balance

Methods of Preparing a Trial Balance

Updated 10 October 2026 · Fact-checked

A trial balance is a list of ledger account figures that checks whether total debits equal total credits. You can prepare it by the totals method, the balances method, or the total-cum-balances method. The balances method is the one commonly used in practice.

Understand Methods of Preparing a Trial Balance

After you post entries to ledger accounts, you need a quick check that the double entry was followed. The trial balance does this. It lists ledger figures in two columns, debit and credit. If the two columns agree, the books are arithmetically accurate. If not, there is an error to find.

There are three ways to build it. In the totals method, you list the total of the debit side and the total of the credit side of every ledger account. Both columns of the trial balance then add up to the same figure, because every entry has an equal debit and credit. This method is long and shows nothing about the actual position of each account.

In the balances method, you take only the closing balance of each ledger account. An account with a debit balance goes in the debit column. An account with a credit balance goes in the credit column. Accounts with nil balance are left out. This is the method commonly used in practice.

The total-cum-balances method combines both. It has four amount columns: debit total, credit total, debit balance and credit balance. It gives the most information, but takes the most time. It is rarely used.

In every method, the check is the same: the two sides must agree. Agreement does not prove the books are error-free. It only shows that the debits and credits are equal.

Key formulas to remember

Agreement rule
Total of debit column = Total of credit column
Applies to the debit and credit columns of the complete trial balance. In the total-cum-balances method, both pairs must agree: the debit total and credit total columns, and the debit balance and credit balance columns. It holds when every entry has equal debit and credit and no arithmetical or one-sided error exists.
Balance of an account
Balance = Larger side total − Smaller side total
Shown on the side that has the larger total.
Normal debit balances
Assets, expenses, losses, drawings, purchases, sales returns → Debit
Also debtors, cash, bank (if not overdrawn), stock, and closing balances of such accounts.
Normal credit balances
Liabilities, capital, incomes, gains, sales, purchase returns → Credit
Also creditors, bank overdraft, loans taken, and provisions.

How to solve Methods of Preparing a Trial Balance questions

Use this method for any question that gives ledger balances or ledger totals and asks for a trial balance.

  1. 1Read the question to see which method is asked: totals, balances or total-cum-balances. If none is stated, use the balances method.
  2. 2List every account name given in the question.
  3. 3Decide the nature of each account: asset, liability, capital, expense, income or loss.
  4. 4Place each balance in the debit or credit column. Assets, expenses and drawings go to debit. Liabilities, capital and incomes go to credit.
  5. 5Watch for special items: closing stock (if given in a trial balance), bank overdraft, returns, and drawings. Place them on the correct side.
  6. 6Add both columns separately.
  7. 7Compare the totals. If they are equal, you are done. If the question asks for a missing figure, find it as the difference between the totals.

Quickest way: Sort and add method

When to use it: Use it for the usual MCQ that gives a list of balances and asks for the trial balance total or a missing figure.

  1. Mark each item D or C next to it as you read.
  2. Add the debit items first. Then add the credit items.
  3. If one item is missing or unknown, subtract the known side from the other side. The missing item goes on the smaller side.
  4. Check the answer against the four options. Eliminate any option that is not the total of one column.

Common mistakes in Methods of Preparing a Trial Balance

  • Putting a bank overdraft in the debit column.

    Students see the word 'bank' and treat it like cash at bank.

    Fix: Bank overdraft is a liability, so it goes in the credit column. Positive bank balance goes to debit.

  • Placing drawings in the credit column with capital.

    Drawings relate to the proprietor, so students group it with capital.

    Fix: Drawings reduce capital and have a debit balance. Put it in the debit column.

  • Putting sales returns in the credit column.

    Students link 'sales' with credit and ignore the word 'returns'.

    Fix: Sales returns have a debit balance. Purchase returns have a credit balance.

  • Mixing totals and balances in the same trial balance.

    Students copy figures from ledgers without checking which method is used.

    Fix: Choose one method before starting. Under the balances method use only closing balances.

  • Including accounts with nil balance or leaving out an account that has a balance.

    Rushing through a long list of accounts.

    Fix: Tick off each given account once placed. Count the items at the end.

  • Believing that equal totals mean the books are fully correct.

    The trial balance is called a check of accuracy.

    Fix: Remember that errors such as omission of a whole entry or wrong account posting do not disturb the agreement.

Worked examples

Example 1

From the following ledger balances of Mehta Traders, prepare the trial balance by the balances method and find the total of each column: Capital ₹2,00,000; Cash ₹15,000; Purchases ₹1,20,000; Sales ₹1,80,000; Debtors ₹60,000; Creditors ₹40,000; Furniture ₹1,30,000; Rent ₹25,000; Drawings ₹30,000; Sales returns ₹5,000; Salaries ₹35,000.

Show the solution
  1. Debit items: Cash 15,000; Purchases 1,20,000; Debtors 60,000; Furniture 1,30,000; Rent 25,000; Drawings 30,000; Sales returns 5,000; Salaries 35,000.
  2. Debit total = 15,000 + 1,20,000 + 60,000 + 1,30,000 + 25,000 + 30,000 + 5,000 + 35,000 = 4,20,000.
  3. Credit items: Capital 2,00,000; Sales 1,80,000; Creditors 40,000.
  4. Credit total = 2,00,000 + 1,80,000 + 40,000 = 4,20,000.
  5. Both columns total ₹4,20,000, so the trial balance agrees.

Answer: Debit total ₹4,20,000 and credit total ₹4,20,000. The trial balance agrees.

Example 2

Rao & Co. has only four ledger accounts. Using the total-cum-balances method, find the balance of each account and the totals of all four columns (debit total, credit total, debit balance, credit balance). Cash account: debit total ₹1,90,000, credit total ₹80,000. Capital account: credit total ₹1,00,000 (no debit entries). Purchases account: debit total ₹80,000 (no credit entries). Sales account: credit total ₹90,000 (no debit entries).

Show the solution
  1. Cash: 1,90,000 − 80,000 = 1,10,000 debit balance.
  2. Capital: 1,00,000 credit balance.
  3. Purchases: 80,000 debit balance.
  4. Sales: 90,000 credit balance.
  5. Debit total column = 1,90,000 + 0 + 80,000 + 0 = 2,70,000.
  6. Credit total column = 80,000 + 1,00,000 + 0 + 90,000 = 2,70,000.
  7. Debit balance column = 1,10,000 + 80,000 = 1,90,000.
  8. Credit balance column = 1,00,000 + 90,000 = 1,90,000.
  9. Both pairs of columns agree, because all the ledger accounts are included.

Answer: Debit total ₹2,70,000 and credit total ₹2,70,000. Debit balances ₹1,90,000 and credit balances ₹1,90,000. Both pairs agree.

Exam tips

  • Read the question for the method name. Totals method questions give both side totals, balances method questions give single figures.
  • Memorise the side of tricky items: drawings, sales returns, bank overdraft, carriage inwards, and provisions.
  • For a missing figure, add each column and take the difference. Put it on the smaller side.
  • Do not spend time hunting errors if the question only asks for the total. Compute the column total and match it with an option.
  • Remember the method facts: totals method shows no actual balances, and total-cum-balances method has four amount columns.

Practice questions from Trial Balance

Methods of Preparing a Trial Balance in other exams

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

Methods of Preparing a Trial Balance: frequently asked questions

What is the difference between the totals method and the balances method?

The totals method lists the total debit and total credit of each ledger account. The balances method lists only the net balance of each account. The balances method is shorter and is the one commonly used in practice.

Which method of trial balance is used most?

The balances method. It shows the actual position of each account and is quick to prepare. It is the method commonly used in practice.

What is the total-cum-balances method?

It is a mix of the totals and balances methods. The trial balance has columns for debit total, credit total, debit balance and credit balance. It gives more detail but takes longer.

If the trial balance agrees, are the books correct?

Not always. Agreement shows only that debits equal credits. Errors like complete omission of an entry, posting to a wrong account of the same type, or compensating errors do not affect the totals.