Trial Balance

Trial Balance

A listing of all general ledger accounts with their debit or credit balances, verifying that total debits equal total credits and providing a basis for financial statement preparation.

For instance, a company’s trial balance might list asset accounts (cash: $35,000 debit, accounts receivable: $75,000 debit), liability accounts (accounts payable: $45,000 credit, notes payable: $150,000 credit), equity accounts (common stock: $100,000 credit, retained earnings: $200,000 credit), revenue accounts (sales: $350,000 credit), and expense accounts (cost of goods sold: $210,000 debit, operating expenses: $125,000 debit).

The trial balance serves as a mathematical check on the recording process, ensuring the fundamental accounting equation remains balanced and the double-entry principle has been maintained. It represents an intermediate step in the accounting cycle, prepared after all transactions have been journalized and posted to the ledger but before financial statements are created. Various types include the unadjusted trial balance (before adjusting entries), adjusted trial balance (after adjusting entries but before closing), and post-closing trial balance (after closing entries, containing only permanent accounts). While the trial balance confirms mathematical equality between debits and credits, it does not detect all possible errors, such as omitted transactions, incorrect amounts recorded in proper balance, or offsetting errors.