Preparing a trial balance first involves balancing off each account in the general ledger (link). Each balance is then entered in the appropriate column - as a debit or a credit.
A bank account that's in the black will have a debit balance in the "T" account, so we do not need to make any particular decision about which column to insert the value. Likewise, if we see that the balance is on the credit side, that tells us we are in the red, but we don't even need to know that to create the trial balance - we just move the balance to the credit column.
Debtors and Creditors
These are usually control accounts (which means they are summaries of individual account holders held seperately in the subsidisary leddgers), and are often known as Sales Ledger Control Account and Purchase Ledger Control Account respectively. They are balance sheet accounts because they represent Assets and Liabilities of the business.
This represents the cost of the goods we have purchased for resale, and would include any carriage or other costs paid to bring them to their present location and condition. In the case of manufacturing businesses, what constitutes the cost of the goods eventually sold is not so clear cut, and would include costs of raw materials, labour and any other costs directly related to their manufacture (eg factory overheads) but that is beyond the scope of this article.
Stock at end of period
Stock remaining at the end represents purchases that have not yet been sold. Since we have paid for them their cost is part of the cost of purchases, but because they remain unsold, they cannot be included in the costs of producing those sales. For this reason they have the effect on the profit and loss account of reducing cost - ie treated like an income, which is a credit. But notice stock at end is also down as a balance sheet item. This is correct, because that stock is a physical asset of the business, and as you may recall, assets on the balance sheet are debits. We basically do a stock take, value what we have, and enter that value as both a debit and credit entry on the trial balance.
Stock at start of period
You may think this heading should have preceded the last one, but it is actually a consquence of having stock left over at the end, That stock that we paid for but haven't sold, takes its rightful place in the next period of being stock we did sell but which we haven't paid for (well, we paid for it last year). If we sold something that we didn't include in this years purchases, we really ought to include that cost as the cost of our sales. For this reason, that stock becomes a debit item on the profit and loss account. Recall that a debit in the profit and loss is an expense.
These need some explanation. First, it is not referring to things like bulk or trade discounts - these are already incorporated into the bottom line of the invoices, and there would be no need to record them seperately. You may have noticed that invoices often include a settlement discount in their terms, maybe something like "Payment within 30 days and 2% discount for settlement within 10 days." Now we have an added complication. Suppose we have a purchase invoice for £100 which we have quite correctly entered in the double entry system for that amount. We pay early and issue a cheque for £98. Surely our system will show our supplier has a credit balance of £2 - ie, we still have a liability. But we don't have a liability, so here's what we do. We open an account for Discounts Received and make a credit entry of £2. This represents an income of £2 to the business. We also want to net off our creditor so the other side of the double entry is to debit the creditors account for the same amount.
If we are the supplier who has given a settlement discount and we receive a cheque for £98, we would open a Discount Given account, and debit it with £2, while crediting the debtors acount with the same.
Items like depreciation, gains and losses and accruals and prepayments are complex areas and will be dealt with in their own pages.