Distinguish between Trial Balance and Balance Sheet.

Basis of Distinction
Trial Balance
Balance sheet
A Trial Balance is prepared to check the arithmetical accuracy of books of accounts.
A Balance Sheet is prepared to know the financial position of an enterprise on a particular date.
Left Hand Side of a trial balance is called ‘Debit side’ while right side is called ‘Credit side’.
Left hand side of a balance sheet is called ‘Liabilities’ side while right hand side is called ‘Assets’ side.
Type of accounts
All types of accounts i.e. personal, real and nominal find their place in the Trial Balance.
Only personal and real accounts are taken while preparing a Balance Sheet.
Normally, the opening stock appears in the Trial Balance whereas Closing Stock does not appear in the trial balance.
In the Balance Sheet only the closing stock appears on the ‘Assets’ side.
When to Prepare
Trial Balance can be prepared frequently (say) at the end of a month or a quarter.
Balance Sheet is generally prepared at the end of the accounting period.
Trial Balance is prepared with the balances of ledger accounts.
Balance Sheet is prepared with the information supplied by the trial balance.
The preparation of trial balance is not compulsory from legal point of view.
It is legally compulsory to prepare a Balance Sheet at the end of the accounting period.
Net Profit/Net Loss
Information about net profit or net loss is not provided in a trial balance.
Information about net profit or net loss is provided in the balance sheet.
A trial balance can be prepared without making adjustments for outstanding expenses, prepaid expense, accrued income etc.
A balance sheet can not be prepared without making year end adjustments for outstanding expenses, prepaid expenses, accrued income etc.

No comments:

Post a Comment