A Trial Balance is a list of balances of all ledger accounts. It is only a statement and not an account and consists of a debit column with all debit balances of accounts and credit column with all credit balances of accounts.
It verifies the arithmetical accuracy of books of accounts but not the accounting accuracy. Trial balance is prepared to locate errors, prepare financial statements, obtain a summary of ledger accounts etc.
Steps to prepare ledger accounts include ascertain the account wise balance of all the ledger accounts, list each account and place its balance in the debit or credit column, compute the total of debit balances column, etc.
Three methods of preparing trial balance are Balance method,Totals method and Compound method.
Under Balance Method Trial Balance is prepared by showing the balances of all ledger accounts and then totaling up the debit and credit columns of the trial balance to assure their correctness. Accounts with no balance are ignored.
Under totals method, the total of credit side and debit side are transferred to the trial balance.
In compound method a combination of balance method and totals methods is adopted.