What are the Differences Between a Trial Balance and a Balance Sheet?

| Updated on December 2, 2022

Learning about various financial statements is one of the most important activities for the business owner and their accountants. However, to be able to use these various financial statements, you need to have a good understanding of them and not just superficial knowledge. This is because just like in GST it doesn’t suffice to just know the meaning of GST you also need to know the nitty-gritty details like a letter of authorization for GST, exempted products, etc. So here we try to explain to you in detail the difference between two extremely significant financial documents the trial balance and the balance sheet. These documents are used by all companies prepared, but many don’t know how the two are different. So let’s find out:

Balance Sheet Meaning

A balance sheet is a financial statement that shows the current financial state of an organization. The balance sheet contains everything from assets and liabilities to equity. An overall statement of all your assets, liabilities, and equity (if any) is called a balance sheet. The balance sheet gives you an overview of your financial position at any point in time.

The main purpose of a balance sheet is to show the amount of money available for the business to use. It does this by showing what you own and what you owe. Your assets are shown on one side of the page and your liabilities are on the other side page. The difference between these two sides is called net worth or equity.

Trial Balance Meaning

What is trial balance is a question that confuses many as people think it’s the same as a balance sheet. Don’t worry we will explain it to you. A trial balance is a summary of the financial position of a business at a specific point in time. It is prepared especially for the preparation of accounts, tax purposes, or financial statement preparation.

The trial balance is used to reduce errors and improve accounting accuracy. It can be used for checking the accuracy of accounts, preparing tax returns, and for internal control purposes to ensure that transactions are properly recorded and accounted for.

Differences Between Trial Balance and Balance Sheet

Partt of Financial Statement

Trial balance is not a component of a financial statement. The trial balance is not a component of a financial statement, but it is an important part of the general ledger. The trial balance includes all the accounts that have been set up on the books, and it shows how each account has been used during the accounting period. As opposed to this a balance sheet is the core and fundamental component of a financial statement and is, therefore, one of the most accurate snapshots of a company’s health.


The trial balance is intended for use by internal users, such as accountants and other staff members who work in the office of an accounting firm. In order for these users to gain an understanding of how their accounts have been used during the accounting period, they must be able to look at a trial balance report. Contrary to this a balance sheet is generally used by external users which include shareholders or investors typically for information.

Data Source

In the trial balance data is collected from General Ledger, Debits, and Credits accounts of all the accounts both in cash and non-cash for each month separately. However, in the case of balance sheets, the data is collected from all the trial balances prepared throughout the year.


The trial Balance is compiled on a monthly basis the Trial Balance is prepared by closing the books of accounting at the end of the month. However, the trial balance can also be prepared quarterly, half-yearly or even yearly depending on the company policy. However, the balance sheet is only prepared annually.

Joseph Williams


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