What is a trial balance?

It is the end of the month and the director of a wholesaler asks whether the figures are right. You do not want to check every booking, but you do want to see quickly whether something is badly wrong. This is where the trial balance helps: all the accounts of the general ledger in one list, with columns for what has been booked on the debit side and the credit side, and the balance.

Its strength lies in its simplicity. Because every booking has two sides, the total of the debits and the total of the credits must be equal. If they are not, something has gone wrong somewhere, for example an incomplete booking. If they are, you cannot yet be sure that everything is right, but the foundation is in place.

What goes wrong without it? Mistakes stay hidden until the accountant or a bank asks about them. An account with an odd negative balance, a suspense account that never clears or a cost line that suddenly doubles: in the list they stand out, in separate reports they do not.

Think about what you do with the list. Read it through for balances that do not make sense. Compare it with the previous period. And keep a copy at the month-end close, so that you can later see how the figures looked at the time.

The trial balance is also the bridge to your reports. The same balances are used to build the profit and loss account and the balance sheet. Checking the list first, and only then sharing the reports, saves you from taking figures back later.