What is a Balance Sheet?
A Balance Sheet is a statement which shows the liabilities, assets and shareholder’s equity of the enterprise. This statement comprises 2 major groups in which it is categorised, namely, assets, which is classified into Non – Current Assets and Current assets. Current Assets are such assets which are easily transformed into cash.
On the other hand, the Non – Current Assets are such types of assets with the assistance of which the enterprise operates the enterprise.
What is Trial Balance?
Trial Balance is a type of accounting report which is used to check the accuracy of the various debit and credit transactions recorded in the ledgers. In simple words, it is a statement that shows the total of debits and credits from the various ledger accounts in one place.
Trial balance is an important part of bookkeeping as it shows the final status of all the accounts. The intention to create trial balance is to facilitate easier preparation of the financial statements.
Let us look at some of the differences between trial balance and balance sheet:
|Trial balance is a statement that is created with the intention of recording balances from all the ledger accounts||Balance sheet is created with the intention to check whether assets of a firm are equal to the equity and liabilities|
|The main application of trial balance is to check whether debit balance and credit balance tally with each other or not||The main application of balance sheet is to determine the accuracy of the financial position of the company|
|Component of Financial Statement|
|Not a component of balance sheet||Is a part of balance sheet|
|Purpose of Creation|
|It is used for internal users of information||It is used for external users of information|
|Frequency of Recording|
|Trial balance is recorded monthly, quarterly, half-yearly and yearly||Balance sheet is prepared yearly|
|Source of data|
|Data collected from General ledger||Data collected from trial balance|
This concludes the topic on the difference between trial balance and ledger. To read about more such interesting concepts on Commerce, stay tuned to BYJU’S.
Also Read: How to Prepare a Trial Balance?
Frequently Asked Questions on Trial Balance and Balance Sheet
What is the purpose of preparing a trial balance?
A trial balance is prepared to identify any numerical errors that may have taken place in the double-entry accounting system.
Why is balance sheet important?
It is important to prepare a balance sheet as it gives an insights to the investors about the company’s financial status.
Why is the trial balance called “trial balance”?
Trial Balance is known as “trial balance” because it is the primary step taken towards preparing the Financial Statements of a company.