Conceptual review on uses of trial balance

A trial balance is a schedule or list of balances both debit and credit extracted from the accounts in the ledger, and including the cash and the bank balances from the cash book. The trial balance follows the rule under the double entry where the total debit in the ledger must be equal to the total credit, and the trial balance is recognized as a recognized method of ascertaining whether this is so or not. The trial balance being a summary of the ledger is also used as a material for preparing trading and profit and loss account and balance sheet.

Uses of a Trial Balance

The major use of a trial balance is that, it is used as a material for preparing trading and profit and loss account and the balance sheet. Being a summary of the ledger, it is for accuracy.

Example 1

The following balances remained in the books of LOBACOBA Limited at 31st December, 2011, after the preparation of the trading account.


Shares capital, authorized and issued 200,000 ordinary shares of N1 each                  200,000

Cash at bank and in hand                                                                                              500

Stock at 31st December 2011                                                                                        61,209

Sundry Debtors                                                                                                             18,005

Sundry Creditors                                                                                                           15,009

Gross profit from Trading A/c                                                                                        128,942

General Reserve                                                                                                             25,000

Salaries/Wages                                                                                                               28,430

Prepayments                                                                                                                  600

Bad debts                                                                                                                       500

Accrued expenses                                                                                                          526

Directors Account (credit)                                                                                              2,500

Debentures interest (half year)                                                                                      600

Sundry expenses                                                                                                           4,100

Rates and insurance                                                                                                      1,520

6% Debentures                                                                                                             20,000

Lighting and cooling                                                                                                    1,310

Postage, telephone &telegram                                                                                    800

Motor vehicle (cost N25,000)                                                                                       15,000

Office fittings and equipment (cost N65,500)                                                             42,350

Profit and loss account at 1/1/2010 (credit)                                                                22,300

Land and building at cost                                                                                            239,362

The following additional information is relevant;

  1. Office fittings and equipment are to be depreciated at 15% of cost and motor vehicle at 20% of cost.
  2. Provision are to be made for;


Director’s fees                                                                                             6,000

Audit fees                                                                                                     2,500

  1. The amount for insurance includes a premium of N600 paid in September 1998 to cover the company against fore loss for the period 1st September, 2010 to 31st August 2011.
  2. A bill for N548 in respect of electricity consumed up to 31st December 2010 has not been posted to the ledger.
  3. The directors have recommended that;
  4. N15,000 be transferred to General reserve.
  5. 5% Dividend be paid on ordinary share capital.


Trial balance of LOBALOBA Limited after trading account at 31/12/2010

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