What are the 3 types & methods of Trial Balance?

 Are you pretty excited to know, what are the 3 different types and methods of Trial Balance? Let's dive into it. Let's learn in simple terms.


types of trial balance



What is the meaning of Trial Balance?

Trial Balance is a statement that is prepared to ensure the arithmetical accuracy of books of accounts. It is a statement, not an account. It is prepared on a particular date to ensure the arithmetical accuracy of books of accounts i.e., to check that all accounts adhere to the Generally Acceptable Accounting Principles and there are no clerical errors exist in books of accounts.

It has all the ledger accounts having debit and credit balances. It has a debit balance and credit balance columns which are equal in amount and tallies. If both the credit and debit columns are equal in amount and tallies then it represents that there are no errors and ensures arithmetical accuracy of books of accounts. The difference amount in the Trial Balance, when debit & credit balance does not tally, will be transferred to the suspense account. When these errors are rectified, then the suspense account is closed by passing an adjustment entry. 




What are the 3 types of Trial Balance?

There are 3 types of Trial balance in accounting. They are 


1. Unadjusted Trial Balance

It simply means a trial balance is prepared before passing the adjusting entries in the books of accounts. It is prepared before making any adjustments and extracting the ledger account balances. It may not be used to prepare the financial statements because this is not final, there may be adjustments required to be made.


2. Adjusted Trial Balance

It simply means a trial balance is prepared after passing the adjusting entries in the books of accounts. It is prepared by making any adjustments in ledger accounts, thereby passing adjusting entries to rectify the errors and by recording any transactions, if omitted. It has the adjusted final balances. Thereby it can be used to prepare the financial statements.


3. Post Closing Trial Balance

It means a statement is prepared after closing entries have been completed. It is prepared by extracting the ledger account balances after passing closing entries in the books of accounts. This statement is the starting trial balance that can be used for the next year.



Methods of Trial Balance




What are the 3 methods of Trial Balance?

The 3 methods are Total method, Balance method, and Combined Method

1. Total Method

Under the Total method, the debit side of an account is totalled and the credit side of an account is totalled. The debit total of an account is taken on debit column of the Trial balance. The credit total of an account is taken on credit column of Trial Balance. Finally, a statement is prepared using this Total method.


2. Balance Method

Under Balance method, ledger accounts are balanced. The debit balance of an account is taken on debit side of trial balance. The credit balance is taken on credit side of trial balance. This is the most common, widely used method across the world.


3. Combined/Hybrid Method

This is simply a combination of both the Total method and the Balance method. This method uses both the Total method and Balance method to prepare the Trial Balance by adding additional columns.




Conclusion

There are 3 types and methods for preparing Trial Balance. The 3 different types are Adjusted, Unadjusted, and Post Closing Trial Balance. The three methods are Total method, Balance method, and Combined method. Also, feel free to comment below and share this useful content.


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