A trial balance is a report listing every account in the ledger with its debit or credit balance, prepared to verify that total debits equal total credits. If the totals don’t match, at least one error exists — a transaction was posted to only one account, an amount was entered incorrectly, or a posting was missed.
A trial balance that balances doesn’t guarantee accuracy. It confirms only that the double-entry mechanism was applied consistently — that every debit had a credit. Errors that preserve equality go undetected: a transaction posted to the wrong account (but with correct debits and credits), a transaction recorded at the wrong amount in both accounts, or a transaction omitted entirely. The trial balance catches mechanical errors, not conceptual ones.
The trial balance is prepared at the end of an accounting period before financial statements are produced. It serves as the starting point for adjustments — entries for accrued revenues, deferred expenses, depreciation, and other items that the regular transaction cycle doesn’t capture. After adjustments, an adjusted trial balance is prepared, and the financial statements are derived from it.
Related terms
- Ledger — the record whose account balances the trial balance lists
- Account — the individual record whose balance appears on the trial balance
- Double-entry bookkeeping — the system whose internal consistency the trial balance verifies