At the outset, it is necessary to note that Trial Balance is a statement of balances. Its preparation does not involve passing of any journal entries. We simply balance various accounts in the ledger and list all accounts which show some balance, whether it is debit or credit. You are aware that when cash book is maintained, the ledger does not contain cash and bank accounts. Hence, cash and bank balances are taken from the cash book. If the number of personal accounts is large, you may prepare separate statements of balances for all debtors and creditors and show only the total debtors and total creditors in the trial balance.

Normally when a trial balance is to be prepared, you have full details of ledger accounts with you. You can, therefore, easily ascertain whether a particular account has a debit balance or credit balance, and prepare the Trial Balance without any difficulty. But, sometimes, you are given only a list of balance. The nature of each balance is not mentioned. In other words, it is not clearly indicated whether the account is showing a debit balance or credit balance. We can't prepare a Trial Balance in such a situation unless we know the nature of each balance. We will not know whether to show a particular balance in the debit column or in the credit column of the Trial Balance.

Hence, when you are asked to prepare a Trial Balance from a given list of balances and it is not clearly indicated whether a particular account has a debit balance or credit balance, you will first have to determine the nature of each balance. In this exercise your knowledge of rules of debit and credit should help you. For example, you are aware that in case of nominal accounts all expenses and losses are debited and all incomes and gains are credited. Hence, accounts like salaries, wages, etc., will show debit balances and the accounts like interest received, discount received, etc., will show credit balances. Similarly, you know the rules for real and personal accounts. 

The accounts of assets like cash in hand, machinery, etc., will show debit balances and accounts like capital, creditors, etc., will show credit balances. For convenience, however, a few guidelines may help you to determine quickly the nature of each balance. They are:

a)All accounts of expenses (including purchases) and losses will be debit balances.

b)All accounts of incomes (including sales) and gains will be credit balances,

c)All accounts of assets will be debit balances.

d)All accounts of liabilities will be credit balances.

e)Capital Account will normally be a credit balance.

f)Drawings Account will be a debit balance.

The difficulty may arise with regard to items like commission, discount, rent and interest, because these can take the form of expenses as well as incomes. In such cases, the nature of balance is usually indicated by mentioning (Dr.) or (Cr.) against each item, or the word 'received' or 'paid' is usually added. So you can treat them correctly without much difficulty. If, however, there is one item for which no such indication is given and you find it difficult to identify the nature of its balance, you just proceed with the preparation of Trial Balance. At the time of totaling the amount columns in the trial balance, you will find that the total of one column is less than the other. This implies that the un-indicated balance pertains to the column which is short.

For example, there is an item of commission Rs. 300. But it is not indicated whether it is paid or received. When you prepare the trial balance, you find that the debit total is short by Rs. 300. This means that Commission Account has a debit balance. Now, if you show it as such in the Trial Balance, it will tally.