Trail balance and balance sheet both are the statement which are very important financial documents. There are many differences between trail balance and balance sheet. Trial balance the statement which contains two columns in which closing balance of credit and the debits are maintained from the ledger. Balance sheet also a statement which also contains two columns that contains assets and the liability of the particular firms or the companies.
From both the financial documents balance sheet is very important. Balance sheet shows the health and wealth of the business. So, it’s very important to understand the trail balance and balance sheet. In this article we will discuss in detail about trail balance and balance sheet. In discussion we will also discuss difference between trail balance and the balance sheet. And other important aspects related to trail balance and balance sheet.
Table of Contents
Trail balance vs Balance sheet
|
Sr. No. |
Trail Balance |
Balance Sheet |
| 1 | List of closing balance of debits and the credits from the ledger. | Shows the assets and the liabilities of the company |
| 2 | Divided in debit and credit. | Sheet divided in assets and the liability. |
| 3 | Internal statement | External statement |
| 4 | Considers opening stocks. | Closing stocks are considered. |
| 5 | Not financial statement | Standard financial statement. |
| 6 | No need to sign the trail balance | Sheet is signed by the auditor. |
| 7 | No specified format for the trail balance | A specified format is fixed.
|
Trail balance
Trail balance is used to record the all closing debits and the credits from the ledgers. It is a internal documents which is used internally. Main purpose of the balance sheet is to check the credit and debit accuracy. In trail balance there should be a proper balance between both the columns of the sheet. Trail balance is very useful to find the errors. It shows that trail balance is free from the any clerical mistakes.
Trail balance is prepared at the end of the month, quarter, half year and end of financial year. In the trail balance opening stock are shown.
Balance sheet
It is a financial statement in which assets, liabilities and shareholder’s equity are shown. Balance sheet contains two columns. Both these columns are sub divided in two columns assets are divided in current and non-current assets. And liabilities are sub divided in current and non-current liabilities.
For example, if we take loan from 1000$ then in balance sheet we 1000$ as assets column and also in the debt of liabilities columns. In this manner balance sheet is balanced.
Balance sheets is prepared in the end of financial years. This statement shows the complete health of the company. It includes all assets and liabilities shareholders stocks and many other details. This statement is very helpful for the investors to study about the company.
Main differencee between trail balance and balance sheet.
- Trail balance is the list of closing balance of debits and the credits from the ledger. Balance sheet shows the assets and the liabilities of the company.
- Balance sheet divided in assets and the liability. While trail balance divided in debit and credit.
- Trail balance is internal statement. While balance sheet is external documents.
- In balance sheet closing stocks are considered. Trail balance considers opening stocks.
- Trail balance is used to check the clerical errors of the statements. Balance sheet shows the position and the health of the company.
- Trail balance is not financial statement. Balance sheet is a standard financial statement.
- Balance sheet is prepared at the end of the financial year. Trail balance is preparing end of the month, half year and end of year.
- There is no need to sign the trail balance. Balance sheet is signed by the auditor.
- There is no specified format of the trail balance. For balance sheet a specified format is fixed.
Conclusion
Trail balance and balance sheet both are very important for the business. Balance sheet is used by the investors to predict the future investment in the company. Trail balance shows the closing of the credits and the debits while balance sheet shows assets and liabilities of the companies.
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Trail balance
Trail balance is used to record the all closing debits and the credits from the ledgers. It is a internal documents which is used internally.
Balance sheet
It is a financial statement in which assets, liabilities and shareholder’s equity are shown. Balance sheet contains two columns.
Main differencee between trail balance and balance sheet
1. Balance sheet divided in assets and the liability. While trail balance divided in debit and credit.
2. Trail balance is internal statement. While balance sheet is external documents.
3. In balance sheet closing stocks are considered. Trail balance considers opening stocks.
4. Trail balance is used to check the clerical errors of the statements. Balance sheet shows the position and the health of the company.