Prepare a Trial Balance

A trial balance lists every account in the ledger with its balance, then verifies that total debits equal total credits. It’s a checkpoint — not a financial statement — that catches posting errors before financial statements are prepared.

Steps:

1. List every account from the ledger that has a non-zero balance.
2. Enter each account’s balance in the debit or credit column based on its normal balance:
   • Assets: debit
   • Liabilities: credit
   • Equity: credit
   • Revenue: credit
   • Expenses: debit
3. Sum the debit column. Sum the credit column.
4. Compare the totals. If they’re equal, the trial balance “balances” and you can proceed. If not, there’s a posting error somewhere.

What a balanced trial balance proves: Every transaction was posted with equal debits and credits.

What it doesn’t prove: That transactions were posted to the correct accounts, that no transactions were omitted, or that amounts are accurate. A $500 rent payment posted to Utilities Expense won’t cause the trial balance to fail — debits still equal credits. The trial balance catches mechanical errors, not judgment errors.

Finding errors when it doesn’t balance:

• Calculate the difference between debit and credit totals.
• If the difference is divisible by 2, you may have posted a debit as a credit (or vice versa) — the error amount is half the difference.
• If the difference is divisible by 9, you likely transposed digits (e.g., wrote $540 instead of $450).
• Check for omitted postings — a journal entry that was recorded in the journal but never posted to the ledger.