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A trial balance is an internal report that will remain in the accounting department. It is a listing of all of the accounts in the general ledger and their balances. However, the debit balances are entered in one column and the credit balances are entered in another column.
A balance sheet is one of the financial statements that will be distributed outside of the accounting department and is often distributed outside of the company. The balance sheet is organized into sections or classifications such as current assets, long-term investments, property, plant and equipment, other assets, current liabilities, long-term liabilities, and stockholders' equity. Only the asset, liability, and stockholders' equity account balances from the general ledger or from the trial balance are then presented in the appropriate section of the balance sheet. Totals are also provided for each section to assist the reader of the balance sheet. The balance sheet is also referred to as the statement of financial position or the statement of financial condition.
TRAIL BALANCE MEANS A STATEMENT OF ALL DEBIT OR CREDIT IN A DOUBLE ENTRY ACCOUNT BOOK.
BALANCE SHEET ITS ALL ABOUT ASSEST , LAIBILITIES &CAPITAL OF A BUSINESS
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There are many differences between a trial balance and a balance sheet. Some of them are pointed out below
Trial balance just represents the balances of each individual ledger in the double entry accounting system as on any specific date. Trial balance is the basic requirement for preparation of Financials.
Balance sheet represents financial position of any company as on any specific date.
Trial 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
Comparison Chart
Definition
Key Differences
Similarities
Conclusion
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
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.
Trial Balance does not include closing stock while the Balance Sheet does not include opening stock.
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
Trial Balance is prepared after posting into ledger whereas Balance Sheet is prepared after the preparation of Trading and Profit & Loss Account.
The Balance Sheet is the part of the Financial Statement while Trial Balance is not a part of the Financial Statement.
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.
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.
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.
