What are the differences between a trial balance and a statement of financial position?

This is a revision lesson in the form of discussion between teacher and his students. The topic of discussion or revision is centered on the question – what is the difference between trial balance and balance sheet?

Teacher:    Last class we discussed the statement of financial position

Class (chorus):  Yes sir!

Teacher   And we discussed the trial balance earlier on.

Class (chorus):  Yes sir!

Teacher   Can we take some questions about them to refresh our memories?

Ade   That I think will be nice, sir.

Teacher           Both trial balance and statement of financial position must balance at any point in                                time. Is it true, Mike?

Mike           Yes, sir. If any of them refuses to balance, then the difference is thrown to a suspense                            account to temporarily balance it. Thereafter, an examination of the relevant records                            can then be carried out to ascertain the cause or causes of difference.

Teacher   Do you agree with that, Rosemary?

Rosemary   Yes I do

Teacher   And …

Rosemary   In addition, journal entries will have to be made to enter the observed errors and                                  thereafter prepare a suspense account

Teacher   And what do you do with Rosemary’s submission, Kate?

Kate   The journal entries will be used to prepare a revised trial balance or                                       revised statement of financial position as the case may be.

Teacher   Now, what are the differences between them, Simon?

Simon           There is quite a number of differences between them depending on the headings or                              classification

Teacher   Tell us the difference between the two based on purpose of  preparation.

Simon           The trial balance is prepared to test the arithmetical accuracy of all entries in the                                  ledgers while the statement of financial position is prepared to shown the financial                                position of an entity at a given date.

Teacher   Sam! What about the underlying principle?

Sam   The underlying principle of preparing the statement of financial position is the                                      accounting equation, which is based on the dual concept of accounting.

  Meanwhile, the underlying principle of preparing the trial balance is the double entry                  principle, which must be complied with while preparing the ledgers

Teacher   Musa!

Musa   Sir!

Teacher   What do you have to say as a difference between the trial balance and a statement of                       financial position based on their outlook?

Musa   The statement of financial position is a statement of affairs of an entity, showing the                            resources owned by the entity and the claims against the resources at any given date.                            On the contrary, a trial balance is a list of balances extracted from the respective   ledgers based on the posted transactions.