The following table summarizes the main differences between the trial balance and balance sheet.

Trial Balance

Balance Sheet

Prepared to check the arithmetical accuracy of the ledger accounts Prepared to show the financial position of the business on a particular date
Includes the balances of all the accounts in the ledger Includes only the assets, liabilities, and capital account balances
Prepared before the trading and profit and loss account Prepared after the trading and profit and loss account
Does not generally show adjusting entries Shows the effect of adjusting entries
Preparation is not essential (e.g., it may not be prepared if the accountant is satisfied with the arithmetical accuracy of the accounts) Preparation is needed to show the financial position of the business
Prepared in a form that is similar to the journal Prepared in a form that is more or less the same as the ledger
Typically prepared monthly Typically prepared yearly or half-yearly
Does not contain the value of the closing stock of goods Contains the value of the closing stock, which appears on the asset side
Does not show profit or loss for a period Gives a clear idea of profit or loss for any given period

Frequently Asked Questions

What is a trial balance?

A Trial Balance is the preparation of all accounts from ledger card notes and prepared in ascending order. In other words, it consist of debit or credit side.

What is a balance sheet?

A balance sheet is prepared at the end of financial year to ascertain the financial position of an organization.

Is trial balance necessary?

A Trial Balance is not necessary if the accounts are checked for accuracy and found in order. If we find any error we will rectify it at that time rather than preparing a Trial Balance and then rectifying it during auditing process. Auditors may insist on Trial Balance because that is the only way they can know about the arithmetical errors if any.

When is the balance sheet prepared?

Balance sheet is prepared at the end of financial year to ascertain the financial position of an organization. It consists of assets, liabilities and capital account balances.

What are debits and credits?

Debits are the side of an account which shows the increase in assets, decrease in liabilities and capital. Credits means opposite i.E., Decrease in assets, increase in liabilities or capital accounts.

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