In the total method, the debit side and credit side of the ledger accounts are added up. The debit totals are placed in the trial balance's debit column and the credit totals in the credit column. The total of the debit column and credit column should agree. The use of the total method for preparing trial balances is limited. The balance method is typically used instead because it shows—in a summarized form—the information from which accountants can prepare financial statements. Keeping in view the importance of the balance method, we will use it in all the examples and exercises on this website.Explanation
Example
Preparation of Trial Balance Using Total Method FAQs
A Trial Balance is the listing of all the ledger accounts (asset, liability, owner's equity, revenue and expenses) with their respective debit and credit balances as of a particular date.
Trial Balance is a summary of Financial Statement accounts showing debits and credits for each account after preparation of journal entries. Balance sheet, on the other hand, gives the list of all the ledger accounts with their respective debit and credit balances as on a particular date without recording any journal entries.
Transactions are recorded in accounting books of accounts by following the process known as double entry Bookkeeping. Each transaction involves a debit to one account and corresponding credit to another account for balancing the two sides of the ledger. Experience has shown that debits must equal credits for an entry to be true or correct.
To prepare Trial Balance, first of all list all the asset, liability, owner's equity, revenue and expenses accounts with their respective debit and credit balances as of a particular date prepared. Now total the debit side which will give you debits amount. Similarly total the credit side which will give you credits amount. If both these sides (debits and credits) add, then your Trial Balance is correct. Otherwise there may be some errors.
Trial Balance can be prepared by two methods: (1) balance method (2) total method.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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