Trial balance: what it is, types, examples and how to fix one

Published Tuesday 6 October 2026

Table of contents

• What is a trial balance?
• Types of trial balances
• Trial balance example
• Trial balance vs balance sheet
• How to prepare a trial balance
• Common trial balance errors
• What to do when a trial balance doesn’t balance
• The role of trial balances in financial statements
• The importance of trial balances for small businesses
• Prepare accurate trial balances with Xero
• FAQs on trial balances

Key takeaways

• Prepare a trial balance monthly, quarterly or annually to catch errors early and keep your records accurate before you create financial statements
• Work through the unadjusted, adjusted and post-closing trial balances in order, so your books are corrected, reported and ready for the next accounting period
• When your totals differ, check whether the difference divides by 2 or 9 to find wrong-side postings or transposed figures
• Treat matching totals as a first check only, as errors of omission, commission, principle and complete reversal still leave the columns equal

What is a trial balance?

A trial balance is a financial report that lists the closing balances of all accounts in your general ledger at a specific point in time. It’s a simple test to check your books for errors before you prepare financial statements or complete an audit.

Think of it like counting the till at closing time: if the cash and the day’s sales differ, you find the mistake before banking it. A trial balance does the same job between recording transactions and producing your reports.

Many businesses prepare a trial balance as the first step when closing their books at the end of an accounting period.

Components of a trial balance

A trial balance uses a simple three-column layout. Each column has its own job:

• Account names: lists all ledger accounts from your chart of accounts on the left
• Debit balances: shows asset and expense account balances in the middle column
• Credit balances: shows liability, capital and income balances on the right

You can leave out accounts you haven’t used during the period. The totals of the debit and credit columns should match.

Types of trial balances

There are three types of trial balances, each prepared at a different stage of the accounting process. Here’s the order you’ll use them in:

• Unadjusted trial balance: prepared first to gather data for closing the books and check for obvious errors
• Adjusted trial balance: prepared next with corrected entries, and used to create your financial statements
• Post-closing trial balance: prepared last to confirm the ledger is ready for the next accounting period

Unadjusted trial balance

An unadjusted trial balance captures all the initial data from your general ledger before any corrections. It records day-to-day transactions that may need adjusting before the ledger is final.

You or your accountant then make adjustments such as:

• Accruals: adding bills you owe but haven’t paid yet
• Deferrals: recognising income only when it’s earned
• Depreciation: spreading asset costs over several years
• Bad debts: writing off invoices customers are unlikely to pay

These adjustments give you a clearer view of your business’s financial position.

Adjusted trial balance

An adjusted trial balance summarises the final balances in all accounts after you’ve made corrections. You prepare it after the unadjusted trial balance but before you create your financial statements.

This report is the starting point for accurate financial reports like your profit and loss statement and balance sheet.

Post-closing trial balance

A post-closing trial balance confirms that all debit and credit balances are equal after you’ve closed temporary accounts. You prepare it after finalising your financial statements.

During this stage:

• temporary accounts (revenue, expenses and dividends) close to zero
• those balances move into retained earnings
• the trial balance lists only permanent accounts: assets, liabilities and equity
• your general ledger is ready for the next accounting period

This creates a clear break between one accounting period and the next.

Trial balance example

Here’s a worked trial balance for a fictional Malaysian business, where total debits and total credits both come to RM125,000. It then shows how one adjusting entry changes the figures while keeping both columns equal.

Closing balances for a catering business

Nurul runs Dapur Nurul, a small catering business in Shah Alam. She prepares an unadjusted trial balance for the financial year ended 31 March 2026.

Her debit balances are bank RM18,500, accounts receivable RM6,200, equipment RM25,000, rent RM24,000, wages RM48,000 and utilities RM3,300. Together they total RM125,000 (RM18,500 + RM6,200 + RM25,000 + RM24,000 + RM48,000 + RM3,300).

Her credit balances are accounts payable RM4,500, a bank loan of RM15,000, owner’s capital of RM10,000 and sales revenue of RM95,500. These also total RM125,000 (RM4,500 + RM15,000 + RM10,000 + RM95,500).

Both columns come to RM125,000, so the unadjusted trial balance balances. Nurul can now move on to her adjustments.

Adjusting for an unpaid utilities bill

Nurul’s March electricity bill of RM300 arrives in April, after the trial balance date. Under accrual accounting, she records the expense in March, when the business used the electricity.

The adjusting entry debits utilities RM300 and credits a new accrued expenses account RM300. Utilities rise to RM3,600, and accrued expenses appear as a RM300 credit balance.

The adjusted debit total is RM125,300 (RM125,000 + RM300), and the adjusted credit total is also RM125,300 (RM125,000 + RM300). Each adjustment has an equal debit and credit, so the totals still match and Nurul can prepare her financial statements.

Trial balance vs balance sheet

A trial balance and a balance sheet are both financial reports, but each has a different job in your accounting process.

A trial balance is an internal bookkeeping tool that lists all account balances from your general ledger. Its purpose is to check that your debits equal your credits before you prepare formal financial statements.

A balance sheet is a formal financial statement that summarises your business’s financial position. It shows your assets, liabilities and owner’s equity at a specific point in time.

Here are the key differences between a trial balance and a balance sheet:

• Purpose: trial balances check for errors; balance sheets report financial position
• Audience: trial balances are internal; balance sheets are shared with stakeholders
• Detail: trial balances list every account; balance sheets group accounts into categories
• Timing: trial balances come first; balance sheets are prepared from trial balance data

Think of the trial balance as a checkpoint. Once you’ve confirmed your books are accurate, you use that data to create your balance sheet and other financial statements.

How to prepare a trial balance

Preparing a trial balance helps you check your bookkeeping before you create financial statements. Follow these steps:

1. List all accounts: gather every account from your general ledger, including assets, liabilities, equity, revenue and expenses
2. Record balances: enter each debit balance in the debit column and each credit balance in the credit column
3. Total each column: add up all debits and all credits separately
4. Compare the totals: if they match, your books are mathematically balanced; if they differ, review your ledger for errors
5. Investigate any difference: work through the diagnostic checks for a trial balance that doesn’t balance, covered below

This process produces an unadjusted trial balance. After you make corrections, you prepare an adjusted trial balance, then a post-closing trial balance once your financial reports are finalised.

Accounting software like Xero automates this process, cutting clerical errors and letting you produce a trial balance whenever you need one.

When to prepare a trial balance

How often you prepare a trial balance depends on your business needs and accounting cycle. Most small businesses prepare trial balances:

• Monthly: to catch errors early and keep records accurate
• Quarterly: to support quarterly reporting and tax estimates
• Annually: as part of year-end closing and financial statement preparation

You might also prepare one whenever you notice discrepancies in your accounts or before an audit. Many businesses run a trial balance straight after their monthly bank reconciliation, so the bank figure is already confirmed.

Common trial balance errors

Simple mistakes are common when you prepare a trial balance. Watch out for these errors:

• Transcription errors: data entry mistakes like mistyping RM500 as RM5,000
• Omission errors: leaving transactions out of the accounts entirely
• Misclassification errors: recording transactions under the wrong account headings
• Wrong-side errors: posting a debit amount as a credit, or the reverse

Catching these errors early keeps your financial statements reliable. Every figure in the trial balance flows through to your reports, and to the business decisions you base on them.

What to do when a trial balance doesn’t balance

When your debit and credit totals differ, work through the checks below in order, starting with the quickest. Most differences trace back to an addition slip, a wrong-side posting or a balance that wasn’t carried over.

1. Recheck the column totals: add up both columns again, ideally after a short break or with a second pair of eyes
2. Calculate the difference: subtract the smaller total from the larger one and note the figure for the next checks
3. Divide the difference by 2: if the result matches a transaction amount, look for that amount posted to the wrong side
4. Check if it divides by 9: this points to a transposed figure, like RM540 entered as RM450, or a slide, like RM500 entered as RM5,000
5. Confirm every ledger balance carried over: compare your trial balance with your ledger to spot any account missing from the list
6. Check opening balances: make sure this period’s opening balances match last period’s closing balances, especially after year-end
7. Look for one-sided or incomplete journal entries: find any entry with only a debit or a credit, or with unequal sides
8. Post a correcting entry: record a correcting journal entry with a clear note, then run the trial balance again

For example, a RM600 difference divides by 2 to give RM300. That tells you to look for a RM300 debit that was posted as a credit. Accounting software like Xero makes these checks quicker, because each manual journal must balance before it posts.

Errors a trial balance won’t show

Matching totals prove only that your debits equal your credits. These errors still leave both columns equal:

• Error of omission: a transaction left out of the books completely, so neither side is recorded
• Error of commission: the right amount posted to the wrong account of the same type, such as the wrong customer
• Error of principle: a transaction recorded in the wrong class of account, such as new equipment booked as an expense
• Compensating errors: two separate mistakes of equal value that cancel each other out
• Complete reversal: the correct accounts used, with the debit and credit swapped

To catch these, compare key balances with source documents like bank statements, invoices and bills. Reviewing each account for unusual figures also helps you spot entries that landed in the wrong place.

The role of trial balances in financial statements

A trial balance helps confirm that your general ledger accounts balance correctly before you prepare financial statements. Accountants and auditors rely on this report to check for errors.

Your bookkeeper or accountant checks that:

• debit and credit column totals match
• no entries are missing from the ledger
• figures were copied correctly from the general ledger
• opening balances agree with the previous period’s closing balances

Once you’ve corrected any errors, the adjusted trial balance becomes the basis for your balance sheets and other financial statements.

The importance of trial balances for small businesses

Trial balances help keep your financial statements accurate and give you confidence that your numbers reflect your business’s true financial health. With accurate books, you can:

• meet compliance and tax requirements
• make better-informed financial decisions
• prepare for audits with reliable records
• compare performance from one period to the next

A monthly trial balance keeps these goals on track, because you fix small errors while they’re still easy to trace.

Prepare accurate trial balances with Xero

A trial balance you trust makes every report that follows it more reliable. Xero builds your trial balance straight from your general ledger, so you can run one whenever you need it without adding up columns by hand.

Use Xero’s financial reporting tools to check your books, make adjustments and produce your balance sheet and profit and loss from the same figures. Try Xero and get one month free to see how much time you save at month-end.

FAQs on trial balances

Here are answers to common questions about trial balances and how they fit into your accounting process.

What are the 3 rules of a trial balance?

Total debits must equal total credits, which confirms your double-entry bookkeeping adds up. You also need to classify each transaction under the right account and enter every figure accurately.

Which accounts normally have a debit or credit balance?

Assets, expenses and owner’s drawings normally carry debit balances, while liabilities, equity and income carry credit balances. Contra accounts work the other way, so accumulated depreciation sits in the credit column even though it relates to an asset.

Can a trial balance have unequal debits and credits?

Yes, but unequal totals always mean there’s an error somewhere in the books. Some bookkeepers hold the difference in a temporary suspense account while they investigate, then clear it once they find the cause.

What is an extended trial balance?

An extended trial balance adds columns for adjustments, then splits each adjusted balance into profit and loss or balance sheet columns. Accountants often use it as a worksheet to move from the trial balance to the final accounts.

Do you still need a trial balance if you use accounting software?

Yes, because software keeps every entry balanced but relies on you to choose the right account. Reviewing the trial balance each month helps you spot misclassified or missing transactions before they reach your reports.