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Difference Between Trial Balance and Balance Sheet

Last updated on July 26, 2018 by Surbhi S

Trial Balance vs Balance sheetTrial Balance is a part of the accounting process, which is a schedule of debit and credit balances taken from all the ledger accounts. As every transaction affect two sides, i.e. every debit has a corresponding credit and the reverse is also true. The total of debit and credit balances are equal in the trial balance. In contrast, the Balance Sheet is the statement that exhibits the company’s financial position, by summarizing the assets, liabilities, and capital on a particular date.

In general, the trial balance is prepared at the end of the month or at the end of the accounting period, i.e. it can be prepared as per the requirement of the entity. On the other hand, balance sheet is prepared only at the end of the accounting period. So, here in this article, we are going to talk about the differences between trial balance and balance sheet, take a read.

Content: Trial Balance Vs Balance Sheet

  1. Comparison Chart
  2. Definition
  3. Key Differences
  4. Similarities
  5. Conclusion

Comparison Chart

Basis for ComparisonTrial BalanceBalance Sheet
MeaningTrial Balance is the list of all balances of General Ledger Account.The Balance sheet is the statement which shows the assets, equity and liabilities of the company.
DivisionDebit and Credit columnsAssets and equity & liabilities heads
StockOpening stock is considered.Closing stock is considered.
Part of Financial StatementNoYes
ObjectiveTo check the arithmetical accuracy in recording and posting.To ascertain the financial position of the company on a particular date.
BalancesPersonal, real and nominal account are shown.Personal and real account are shown.
PreparationAt the end of each month, quarter, half year or financial year.At the end of the financial year.
UseInternal UseExternal Use

Definition of Trial Balance

Trial Balance is a statement which lists all the balances of the Real, Personal and Nominal Account irrespective of Capital or Revenue account. It contains two columns debit and credit. If the transactions are recorded properly by giving dual sided effect and then posted systematically, then the total of both the columns would be identical.

But if the total of both the columns is distinct then the chances of errors in the recording and posting are there. However, some errors are not revealed through trial balance they are compensating errors, error of omission, error of commission, error of principle and others.

Definition of Balance Sheet

A Balance Sheet is a statement which represents the assets, liabilities and shareholder’s equity of the company is known as Balance Sheet. This statement contains two major heads in which it is classified: One is assets, which is divided into Current and Non – Current Assets. Current Assets are those assets which are readily converted into cash while the Non – Current Assets are those assets with the help of which the company runs the business.

Another part is Equity and Liabilities, where Equity contains the amount invested by the Equity Shareholders and Reserves & Surplus. Liabilities are divided into two sections Current and Non – Current Liabilities. Current Liabilities are the debt, which is to be paid off within one year while the Non – Current Liabilities means the debt, the repayment of which can be done after a certain time.

Key Differences Between Trial Balance and Balance Sheet

  1. Statement of debit and credit balances were taken from general ledger is known as Trial Balance. Statement of assets and equity & liabilities is known as Balance Sheet.
  2. Trial Balance does not include closing stock while the Balance Sheet does not include opening stock.
  3. Trial Balance checks the arithmetical accuracy in the recording and posting while balance sheet is prepared to determine the financial position of the company on a specific date
  4. Trial Balance is prepared after posting into ledger whereas Balance Sheet is prepared after the preparation of Trading and Profit & Loss Account.
  5. The Balance Sheet is the part of the Financial Statement while Trial Balance is not a part of the Financial Statement.
  6. Balances of all personal, real and nominal account are shown in the trial balance. On the contrary, Balance sheet shows the balances of personal and real account only.
  7. The trial balance is prepared at the end of each month, quarter, half year or the financial year. Conversely, the balance sheet is prepared at the end of each month.
  8. The trial balance is prepared for internal use only, however, the balance sheet is prepared for both internal and external use, i.e. to inform outside parties about the financial condition of the entity.

Similarities

  • Both are Statement.
  • The heads of the two needs to be identical.
  • Consideration of Real, Personal and Nominal Account.

Conclusion

There are many differences between the two statements. The Trial Balance and Balance Sheet are very dissimilar from each other. The preparation of Trial Balance is not compulsory at all, but the preparation of Balance Sheet is obligatory for every company. The Trial Balance is not read by the users of the financial statement or stakeholders, but Balance sheet is used by them.

Trial Balance can be prepared as per requirement of the organization while the Balance Sheet is prepared at a particular date which is usually at the end of the accounting year.

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Comments

  1. Sierra says

    November 17, 2016 at 5:28 am

    Nice

    Reply
  2. Pavan says

    February 16, 2018 at 3:08 pm

    what is the difference between currency and money

    Reply
  3. Vaibhav Patil says

    November 23, 2018 at 8:54 pm

    Thank you so much

    Reply
  4. JOHN ONESMO says

    March 11, 2019 at 5:47 pm

    what if debt side is not equal to credit side in trial balance.

    Reply
    • Surbhi S says

      March 12, 2019 at 9:47 am

      When there is a disagreement in the debit and credit side of the trial balance, then the trial balance is tallied by transferring the difference in the suspense account.

      Reply
  5. lyn says

    November 4, 2019 at 8:28 am

    Should trial balances for the same period but run from accounting software at different dates be identical?

    Reply
  6. Ashutosh says

    January 6, 2020 at 12:19 am

    A goood information

    Reply
  7. Accounts Definition says

    September 17, 2020 at 8:46 am

    A valuable post on differences between trial balance and balance sheet. Thanks for sharing.

    Reply
  8. DINESH says

    February 13, 2021 at 6:34 pm

    Very helpful post. Thank you

    Reply
  9. Sandra says

    March 7, 2021 at 7:54 pm

    Nice

    Reply

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