A trial balance is a snapshot of every account balance in the ledger at a point in time, with debits in one column and credits in another. The two columns should add up to the same total.
What it means
Because double-entry bookkeeping requires equal debits and credits for every transaction, the sum of all debit balances should equal the sum of all credit balances. The trial balance tests this. If the columns do not match, there is a posting error to find before the financial statements can be prepared.
Where it fits in
The trial balance is the bridge between the ledger and the financial statements. Payroll has to be posted correctly for the trial balance to balance, and the statements - income statement and balance sheet - are built from the trial balance figures.
Key rules
- Lists every account's balance, debits against credits.
- The two columns must agree if posting was correct.
- A difference flags a bookkeeping error to trace.
- The starting point for preparing the financial statements.
