What is a trial balance?
Trial balance (definition)
A trial balance is a financial report showing the closing balances of all accounts in the general ledger at a point in time. Creating a trial balance is the first step in closing the books at the end of an accounting period.
All the ledger accounts (from your chart of accounts) are listed on the left side of the report. You can omit any accounts that haven’t been used during the period. Then there’s a column with debit balances, and one with credit balances. The total debits and credits should match.
Trial balance format
The trial balance shows the closing balances of all accounts in the general ledger at a point in time.
What is a trial balance in accounting?
Trial balances are used to prepare balance sheets and other financial statements and are an important document for auditors. A trial balance is done to check that the debit and credit column totals of the general ledger accounts match each other, which helps spot any accounting errors.
If the totals don’t match, a missing debit or credit entry, or an error in copying over from the general ledger account may be the cause. But there could still be mistakes or errors in the accounting system even if the amounts do match. A bookkeeper or accountant uses a trial balance to double-check things are correct.
An initial trial balance report is called an unadjusted trial balance. After adjustments have been made to correct any errors, it’s called an adjusted trial balance and is used to prepare other financial statements.