Trial balance

A list of every general ledger account and its balance at a date, with total debits equal to total credits.

DefinitionA list of every general ledger account and its balance at a date, with total debits equal to total credits.

A trial balance lists every account in the general ledger with its closing balance at a given date, split into debit and credit columns. Because double-entry bookkeeping records every transaction twice, the two columns must total the same. It is the starting point for the income statement and balance sheet.

How it is computed

Sum all debit balances and all credit balances. The difference must be zero; any difference points to a posting error.

Example

A trial balance shows total debits of $1,284,500 and total credits of $1,283,600, a difference of $900. Because $900 is divisible by 9, a transposition is likely, and the search finds a $5,400 entry posted as $4,500.

Where it goes wrong

Assuming a balanced trial balance is correct. An entry posted to the wrong account, or omitted on both sides, still balances. It is also only as current as the period cut: late invoices change it after it has been run. The profit and loss template starts from these balances.

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