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- The trial balance
The trial balance
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A trial balance lists all the ledger balances to check that total debits equal total credits.
Purpose
A trial balance lists every ledger account balance at a date, in a debit or credit column.
It checks the arithmetical accuracy of the double entry: total debits should equal total credits.
It is also the starting point for preparing the financial statements.
It checks the arithmetical accuracy of the double entry: total debits should equal total credits.
It is also the starting point for preparing the financial statements.
Which side?
Limitations
A trial balance that balances does not prove the books are correct.
Some errors do not affect the totals, such as missing a transaction completely (omission), posting to the wrong customer (commission) or posting to the wrong type of account (principle).
Some errors do not affect the totals, such as missing a transaction completely (omission), posting to the wrong customer (commission) or posting to the wrong type of account (principle).
Debit balances total £84 500. Credit balances are capital £50 000, sales £30 000 and payables £4500. Does it balance?
- Credits = 50 000 + 30 000 + 4500 = £84 500
- Debits = £84 500
Answer: Yes, both total £84 500
A trial balance lists ledger balances to check debits equal credits and to help prepare financial statements. Assets, expenses and drawings are debits; liabilities, capital and income are credits. It does not reveal every error.
The interactive lesson includes the diagrams for this topic.
Check you have got it
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