What are the Differences Between a Trial Balance and a General Ledger?

Have you ever felt confused between trial balance and general ledger? A trial balance is a document that lists the ending balances in all the general ledger account, and the accountants will generate this document when an accounting period comes to an end. On the other hand, a general ledger is the main set of accounts, and it summarises all business transactions of the company in an accounting period. The accountants will use it to aggregate information and generate the company’s financial statements (Also see Which is the Most Important Financial Statement?).

Both trial balance and general ledger are one of the components of an accounting cycle, and you can find the details of a lot of things such as assets, liabilities, revenues and so on in both of them. However, there are some significant differences between both of them. If you, as a business owner, is not good at managing such accounting records, do not hesitate to hire a bookkeeping service in Singapore.

Listed below are some of the differences between a trial balance and a general ledger:

Amount of information

The trial balance only includes the ending balances of all the accounts, whereas the general ledger includes the details of all business transactions that make up all the accounts. Thus, while the trial balance may be a document with just a few pages, the general ledger can be a few hundred pages.

Accounting purposes

The use of trial balance can be a lot more restricted compared to the general ledger. The accountants will use the trial balance to compare the sum of debits and credits to check whether the books are balanced. On the contrary, the accountants, especially financial accountants (Also see Differences Between Financial Accounting and Cost Accounting), may use the general ledger as the primary source of information during an investigation on the accounts.

Audit purposes

In the process of the year-end audit, the auditors will ask for a copy of the company’s trial balance to get information about the final balance of every account (Also see How to Ensure Your Company’s Audit Process Goes Smoothly?). Conversely, they will use the general ledger to trace all the business transactions separately.

The nature of the document

The trial balance is the document that the accountants derive from the general ledger. In contrast, the general ledger is a database that stores all the information about the company’s accounting transactions.