Ledger and Trial Balance
Senior 6 · Entrepreneurship
Ledger and Trial Balance
Lesson 4 of 4
25 min
On 2 April Mutoni takes her books to an accountant in Huye, to find out whether March made a profit. Before he looks at a single figure, he asks: "Does your trial balance agree?" If the ledger's debits and credits do not match, something has been posted wrongly, and any profit worked out from those figures could be wrong too.
The trial balance is the bridge between the ledger (Lessons 1 to 3) and the financial statements (Unit 2). It takes a few minutes to prepare and catches many errors before they reach the statements.
Definition
Trial balance: a list of all the balances in the ledgers (including the cash book) on a particular date, with debit balances in one column and credit balances in another. Because every transaction was recorded with equal debits and credits, the two column totals should be equal:
Example: Mutoni's trial balance as at 31 March 2026 has totals of Frw 9,970,000 on both sides.
| Importance | Limitation |
|---|---|
| Tests the arithmetic of the double entry: equal totals show that every posting had a debit and a matching credit | Equal totals do NOT prove the books are right: six kinds of error leave the totals equal |
| Brings every balance onto one page, the starting point for the income statement and balance sheet | It only works where full double entry is kept; a business with single-entry records cannot prepare one |
| Shows at a glance what the business owns, owes and has earned and spent | It is a list at one date, not a financial statement: it does not show profit or financial position by itself |
| Helps to locate errors, by narrowing the search to the accounts involved | If it is wrong and not corrected, the statements prepared from it will be wrong too |
A trial balance is dated "as at" a single day, because it lists balances at that moment, not transactions over a period.
Worked example 1: Mutoni's trial balance
Using the balances found in Lesson 3, prepare Mutoni's trial balance as at 31 March 2026.
Step 1: decide the column for each balance. Debit: assets (motorcycle, fittings, debtors, cash, bank), expenses (purchases, returns inwards, rent, wages, electricity) and drawings. Credit: capital, incomes (sales, returns outwards) and liabilities (creditors).
Step 2: list and total.
| Mutoni Hardware: trial balance as at 31 March 2026 | ||
|---|---|---|
| Account | Dr (Frw) | Cr (Frw) |
| Capital | 5,500,000 | |
| Drawings | 100,000 | |
| Motorcycle | 1,200,000 | |
| Shop fittings | 900,000 | |
| Sales | 2,820,000 | |
| Purchases | 2,670,000 | |
| Returns inwards | 50,000 | |
| Returns outwards | 100,000 | |
| Rent | 250,000 | |
| Wages | 180,000 | |
| Electricity | 35,000 | |
| Umucyo Builders (debtor) | 300,000 | |
| Gikongoro Contractors (debtor) | 340,000 | |
| Kivu Building Supplies (creditor) | 500,000 | |
| Akagera Paints (creditor) | 1,050,000 | |
| Cash | 195,000 | |
| Bank | 3,750,000 | |
| Totals | 9,970,000 | 9,970,000 |
Step 3: check the totals. Debits: . Credits: . The totals agree, so March's double entry is arithmetically correct.
Tip
DEAD on the left, CLIC on the right. The DEAD CLIC rule from S2 also sorts a trial balance: Drawings, Expenses, Assets: Debit column. Capital, Liabilities, Income: Credit column. Returns inwards behaves like an expense (debit) and returns outwards like an income (credit).
Each of these errors puts an equal debit and credit into the books, so the totals still agree.
| Error | What happens | Example in Mutoni's books |
|---|---|---|
| Omission | A transaction is left out completely | A credit sale of Frw 120,000 to Umucyo Builders is never written in the sales journal |
| Commission | Right amount and side, but the wrong account of the same class | Umucyo's Frw 500,000 is credited to Gikongoro Contractors' account |
| Principle | The entry goes to the wrong CLASS of account | The shop fittings (an asset) are debited to Purchases (goods for resale) |
| Original entry | A wrong amount in the book of prime entry, so both halves are wrong | An invoice for Frw 340,000 is written in the sales journal as Frw 304,000 |
| Complete reversal | The right accounts, with debit and credit swapped | Rent paid: debit Bank and credit Rent, Frw 250,000 |
| Compensating errors | Two mistakes of the same size that cancel out | Sales over-added by Frw 10,000 and Wages over-added by Frw 10,000 |
| Error | Example | Effect on the totals |
|---|---|---|
| Only one half of an entry posted | Wages of Frw 180,000 credited in the cash book but never debited to Wages | Credits exceed debits by 180,000 |
| Different amounts on the two sides | Rent debited Frw 250,000 but credited in the bank column as Frw 205,000 | Debits exceed credits by 45,000 |
| Both halves on the same side | Drawings of Frw 100,000 debited to Drawings AND debited to Cash | Debits exceed credits by 200,000 |
| An account added or balanced wrongly | The Sales account totalled at Frw 2,802,000 instead of 2,820,000 | Debits exceed credits by 18,000 |
| A balance copied wrongly, left out, or put in the wrong column | Returns outwards of Frw 100,000 listed as a debit | Debits exceed credits by 200,000 |
Definition
Suspense account: a temporary account that receives the difference on a trial balance that does not agree, so that work can continue while the error is found. When the error is found, it is corrected and the suspense account is closed.
Example: credits exceed debits by Frw 10,000; Frw 10,000 is entered on the debit side of a suspense account until the cause is found.
Worked example 2: finding the errors
The bookkeeper of Iradukunda Stationery, Muhanga, extracts this draft trial balance. (Illustrative figures.) Find and correct the errors.
| Draft trial balance as at 30 June 2026 | ||
|---|---|---|
| Account | Dr (Frw) | Cr (Frw) |
| Capital | 1,335,000 | |
| Drawings | 120,000 | |
| Equipment | 900,000 | |
| Sales | 2,050,000 | |
| Purchases | 1,250,000 | |
| Returns outwards | 40,000 | |
| Wages | 120,000 | |
| Rent | 150,000 | |
| Debtors | 330,000 | |
| Creditors | 260,000 | |
| Cash | 85,000 | |
| Bank | 640,000 | |
| Totals | 3,635,000 | 3,645,000 |
Step 1: re-add. Both columns are added correctly, so the difference is real: , with credits bigger.
Step 2: check each balance's column. Returns outwards is a reduction of purchases and has a CREDIT balance. Listing Frw 40,000 as a debit overstates debits by 40,000 and understates credits by 40,000. Moving it changes the difference by : debits become and credits , so credits are now bigger by 90,000.
Step 3: test the new difference. , divisible by 9, so suspect a transposition. Checking each balance against the ledger shows the Wages account balance is Frw 210,000, copied as 120,000.
Step 4: correct and re-total. Debits: . Credits: . The trial balance now agrees.
Warning
"It balances, so it's right" is the most common exam mistake. Mutoni's trial balance would still agree if the fittings had been debited to Purchases, or a whole invoice had been left out. Agreement proves the arithmetic of the double entry, nothing more. In exam answers, always add "but it does not reveal errors of omission, commission, principle, original entry, complete reversal or compensating errors".
Accounting Stuff, "The Trial Balance Explained (Full Example!)". Watch how the ledger balances are sorted into debit and credit columns and how the totals are checked. The video uses dollars and some American terms; the method is the one in this lesson.
Practice
Further reading
Sources and credits
Written by Ganzaa: Mutoni's trial balance, the error-finding flowchart, the tables of errors, the Muhanga draft trial balance and the practice items. The businesses, names and figures are illustrative (2026).
