Trial Balance
A report listing all general ledger accounts and their balances to verify debits equal credits.
Definition
A trial balance is a worksheet that lists all accounts in the general ledger with their debit or credit balances. It verifies that total debits equal total credits—a fundamental requirement of double-entry bookkeeping.
If debits don't equal credits, there's an error somewhere: a transaction was recorded incorrectly, posted to the wrong account, or entered only once instead of twice. The trial balance is the first check for accounting accuracy.
Why It Matters
The trial balance is a key control in the accounting close process. Before preparing financial statements, run a trial balance to ensure books are in balance. An out-of-balance trial balance stops financial statement preparation until errors are found and corrected.
Even if the trial balance is balanced, it doesn't guarantee accuracy—you could have posted to the wrong accounts. But an unbalanced trial balance definitely indicates errors.
Examples
- 1
Trial balance shows: total debits $500,000, total credits $500,000 = balanced, proceed to financial statements.
- 2
Trial balance out of balance by $1,000—review recent entries to find the error before preparing statements.
- 3
Common trial balance errors: transposition (entering $1,234 as $1,243), omitted entry, posting to wrong side (debit instead of credit).
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