The Trial Balance (Edexcel IGCSE Accounting)

Revision Note

Uses & Limitations of a Trial Balance

What is a trial balance?

  • A trial balance is a statement which lists all accounts and their balances on a particular date

    • Each balance is placed either in the debit column or in the credit column

  • The totals of the debit and credit columns are calculated

    • The totals should be equal

  • A trial balance is not part of the double entry system

  • The balance for the inventory account will always be the opening balance

    • This is because the current inventory is contained within the purchases account

    • This is dealt with once the balances are transferred to the income statement

Trial balance showing the balances of all accounts as either a debit or credit. The totals are equal.
Example of a trial balance

What are the uses of a trial balance?

  • A trial balance is used to check for arithmetic errors in the ledger accounts

    • If the balance of a ledger account has been miscalculated, it is likely that the totals in the trial balance will not be equal

  • Preparing a trial balance helps with the preparation of financial statements

    • All the balances are in one place

What are the limitations of a trial balance?

  • Not all errors are identified by a trial balance

    • The totals may be equal despite there being errors

  • You will need to use other measures to locate errors

    • Such as bank reconciliation statements and control accounts

Preparing a Trial Balance

How do I prepare a trial balance?

  • You will likely be given a list of accounts and balances

  • STEP 1
    Identify whether each account should have a debit or a credit balance

    • The table below gives a summary of the different accounts

  • STEP 2
    Check that the total of the debits is equal to the total of the credits

  • STEP 3
    Write each account in the trial balance and put the balance in the correct column

  • STEP 4
    Total each column

Accounts with debit balances

Accounts with credit balances

Purchases

Purchases returns (returns outwards)

Sales returns (returns inwards)

Sales (revenue)

Other expenses

Other income

Trade receivables

Trade payables

Bank

Bank overdraft

Other assets

(Including inventory, vehicles, machinery, etc)

Other liabilities

(Including bank loan, mortgage, etc)

Drawings

Equity

Provision for depreciation

Provision for doubtful debt

Examiner Tips and Tricks

Check the totals agree before you write any accounts in the trial balance. This will help you spot any mistakes before you write anything in the trial balance.

How do I amend a trial balance?

  • You could be given a trial balance which contains errors

    • The balances could also be in the wrong columns

  • STEP 1
    Correct the errors to find the correct balances for each account

  • STEP 2
    Double-check whether each account has been correctly identified as a debit or a credit

  • STEP 3
    Complete a corrected trial balance

    • The totals will be equal

Worked Example

Dimitri is a sole trader. He has prepared a trial balance on 31 March 2024. However, it contains errors. 

Dimitri
Trial Balance at 31 March 2024

Debit

$

Credit

$

Sales

35 471

Purchases

17 714 

Returns outwards

1 407

Discount received

1 895

Rent paid

5 321

General expenses

2 087

Office equipment at cost

20 000

Provision for depreciation of office equipment

4 580

Trade receivables

9 710

Trade payables

3 980

Inventory

7 060

Bank overdraft

450

Equity at 1 April 2023

20 869

Drawings

8 760

67 933

71 371

Dimitri has included the value of the inventory on 31 March 2024, the value of the inventory on 31 March 2023 was $2 000 lower than this value. Prepare a corrected trial balance at 31 March 2024.

Answer

  • STEP 1 - Correct any amounts

    • The value of inventory should be for 31 March 2023

      • $7060 - $2000 = $5060

  • STEP 2 - Identify whether the balances should be debits or credits

    • The following should have debit balances:

      • Purchases

      • Rent paid

      • General expenses

      • Office equipment at cost

      • Trade receivables

      • Inventory

      • Drawings

    • All other items should have credit balances

  • STEP 3 - Prepare the corrected trial balance

Dimitri
Corrected Trial Balance at 31 March 2024

Debit

$

Credit

$

Sales

35 471

Purchases

17 714 

Returns outwards

1 407

Discount received

1 895

Rent paid

5 321

General expenses

2 087

Office equipment at cost

20 000

Provision for depreciation of office equipment

4 580

Trade receivables

9 710

Trade payables

3 980

Inventory

5 060

Bank overdraft

450

Equity at 1 April 2023

20 869

Drawings

8 760

68 652

68 652

Last updated:

You've read 0 of your 5 free revision notes this week

Sign up now. It’s free!

Join the 100,000+ Students that ❤️ Save My Exams

the (exam) results speak for themselves:

Did this page help you?

Dan Finlay

Author: Dan Finlay

Expertise: Maths Lead

Dan graduated from the University of Oxford with a First class degree in mathematics. As well as teaching maths for over 8 years, Dan has marked a range of exams for Edexcel, tutored students and taught A Level Accounting. Dan has a keen interest in statistics and probability and their real-life applications.

Lucy Kirkham

Author: Lucy Kirkham

Expertise: Head of STEM

Lucy has been a passionate Maths teacher for over 12 years, teaching maths across the UK and abroad helping to engage, interest and develop confidence in the subject at all levels.Working as a Head of Department and then Director of Maths, Lucy has advised schools and academy trusts in both Scotland and the East Midlands, where her role was to support and coach teachers to improve Maths teaching for all.