ZIMSEC O Level Principles of Accounts Notes: The trial balance

  • It has already been explained that at the core of accounting is the double entry principle.
  • The principle states that there are two aspects or sides to every transaction: a debit and a credit.
  • A trial balance is a list of all the debits and all the credits from an entity’s books at a given date.
  • A trial balance is “extracted” from the books of accounts by simply listing every account balance from the given entity’s books.
  • These balances are then presented in two columns.
  • One column is for all the debit balances and the other is for all accounts with the credit balances.
  • Accounts with debit balances will be for assets accounts e.g. Motor Vehicle and expense accounts e.g. Rent payable.
  • Accounts with debit balances will be for liabilities e.g. Loan from Bank and Trade Creditors, Capital and Reserves and Income accounts for example Rent receivable.
  • Because all transactions are recorded using the double entry principle it means that all the debit balances must match the credit balances.
  • This is because every transaction is recorded twice:
  • Once on the debit side of the receiving account and,
  • Once on the credit side of the giving account.

Purposes of the Trial Balance

  • A trial balance has two main purposes:
  1. It is a starting point for producing an income statement (also known as the Trading and Profit and Loss Account)and a statement of financial (also known as The Balance Sheet).
    position at the end of an accounting period.
  2. A second purpose of a trial balance is to check for errors in the accounting system.
  • If there is a difference between the totals on the credit and debit side it means an error would have occurred at some stage in the processing of accounts.¬†Debit and Credit balances in the trial balance must always be equal.
  • The accountant/bookkeeper must then therefore investigate, find the cause of the error and correct it.
  • Below is an example of a Trial Balance.

J. Chimusoro
Trial Balance as at 31 December 2014

Capital15 000
Land and Buildings10 000
Motor Vehicle3 000
Furniture and Fittings2 000
Trade Creditors2 000
Bank Loan3 000
Trade Debtors (Accounts Receivable)3 000
Cash at Bank2 500
Cash in Hand500
Sales12 000
Purchases9 000
Packaging1 400

32 000

32 000

  • Take care when you are “extracting” your Trial Balance to include the title. Most students forget to include it as part of their answer.
  • Titles form part of the answer and you will be penalised if you do not include them.
  • You can go to this topic to learn more about how to prepare a Trial Balance

To access more topics go to the Principles of Accounts Notes page.