Difference between Trial Balance and Balance Sheet

If you are a movie buff than you can compare trial balance with a movie teaser and balance sheet with full movie. In order to understand it better, let’s look at some of the differences between trial balance and balance sheet –

  1. While trial balance is prepared to check the arithmetical accuracy of the various ledger accounts whereas balance sheet goes much beyond arithmetical accuracy it is more comprehensive in nature and it depicts the financial position of the company for the financial year.
  2. After preparing the trial Balance, one cannot ascertain the profit or loss which the company has made during the year as it is made first however preparation of balance Sheet is the final step (it is prepared after trading account and profit and loss account) one gets to know the exact amount of profit or loss which the company made during the year.
  3. In trial balance closing stock does not appear and also adjustments relating to prepaid expense, accrued income etc…, are not made  whereas in the balance sheet closing stock of goods appear on the asset side and also various adjustments relating to prepaid expense, accrued income etc…, have to made in order to fully reflect the financial position of the business.
  4. There are two sides in trial balance one is named debit and other is named credit, in these two sides total of real, personal and nominal accounts is posted from the ledger, whereas in the balance sheet the two sides are named as asset and liability.
  5. While trial balance is for internal purpose and therefore it can be prepared frequently, also one does not need to follow a particular format in accordance with accounting standards whereas balance sheet is seen by outsiders like creditors, shareholders, government, credit rating agencies and other such outside parties and therefore it is prepared once in a year or at the end of accounting period, also it needs to be prepared in a particular format as specified by the accounting standard.
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