Difference between Trial Balance and Balance Sheet :

 

 

S.No.	Basis Distinction	Trial balance	Balance sheet
1.	Objective	To know the arithmetic al accuracy of the accounting work,	To know the true and fair financial position of a business.
2.	Format	The columns are debit balances and credit balances.	The two sides are assets and liabilities.
3.	Content	It is a summary of all the ledger balances — personal, real and nominal accounts.	It is a statement showing  closing  balances            of  personal & real accounts.
4.	Stage	It is the middle stage in the preparation of accounts.	It is the last stage in the  preparation of accounts.
5.	Period	It can be prepared periodically, say at the end of the month, quarterly or half yearly, etc.	It is generally prepared at the end of the accounting period.
6.	Preparation	It is prepared before the preparation of trading, profit and loss account.	It is prepared after the preparation of trading, profit and loss account.
7.	Stock	It shows opening stock only.	It shows closing stock only.
8.	Order	Balances shown in the trial balance are not in order.	Balances shown in the balance sheet must be in order.
9.	Evidence	It cannot be produced as a documentary evidence in the court.	It can be produced as a documentary evidence.
10.	Compulsion	Preparation of trial balance is not compulsary.	Preparation  of  the balance sheet is a must.

 

Illustration 

From the following Trial Balance of M/s. Ram & Sons, prepare trading and profit and loss account for the year ending on 31st March
2002 and the balance sheet as on the date:

Trial Balance as on 31st March 2002

Particulars	Debit Rs.	Credit Rs.
Opening Stock (1.4.2001) Purchases Discount allowed Wages	5,000 16,750 1,300 6,500
Sales		30,000
Salaries	2,000
Travelling expenses	400
Commission	425
Carriage inward	275
Administration expenses	105
Trade expenses	600
Interest	250
Building	5,000
Furniture	200
Debtors	4,250
Creditors		2,100
Capital		13,000
Cash	2,045
	45,100	45,100

 

Stock on 31st March 2002 was Rs. 6,000.

Solution :

M/s. Ram & Sons
Trading and Profit and Loss Account
for the year ending 31st March 2002
Dr.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Cr.

Particulars	Rs.	Particulars	Rs.
To Opening stock	5,000	By Sales	30,000
To Purchases	16,750	By Closing stock	6,000
To Wages	6,500
To Carriage inward	275
To Gross profit c/d (transferred to P&L A/c)	7,475
	36,000		36,000
To Discount	1,300	By Gross profit                                                                                (transferred from P&L A/c)	7,475
To Salaries	2,000
To Travelling expenses	400
To Commission	425
To Administration expenses	105
To Trade expenses	600
To Interest	250
To Net profit (transferred to capital A/c)	2,395
	7,475		7,475

 

Balance Sheet as on 31st March 2002

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Creditors		2,100	Cash		2,045
Capital	13,000		Debtors		4,250
Add Net profit	2,395		Stock		6,000
		15,395	Furniture		200
			Building		5,000
		17,495			17,495