What is a Trial Balance?

A trial balance is an accounting report that states the ending balance in each general ledger account. This means that it states the ending balance for each asset, liability, equity, revenue, gain, and loss account in an accounting system. This report is printed as part of the period-ending closing process, as stated in the closing procedure. A sample trial balance is shown in the following exhibit.

What is the Purpose of a Trial Balance?

The purpose of a trial balance is to ensure that all entries made into an organization's general ledger are properly balanced. A trial balance lists the ending balance in each general ledger account. The total dollar amount of the debits and credits in each accounting entry are supposed to match. Therefore, if the debit total and credit total on a trial balance do not match, this indicates that one or more transactions were recorded in the general ledger that were unbalanced.

From a practical perspective, accounting software packages do not allow users to enter unbalanced entries into the general ledger. This means the trial balance is not needed by entities that have computerized systems. If a business is still using manual record keeping, then the trial balance has more value, since it is possible to create unbalanced entries in such a system.

When a manual recording keeping system is used, the trial balance is also used to create the financial statements. This means that the account balances in the trial balance are manually aggregated into the line items found in the financial statements.

Auditors also use the trial balance. They request it early in an audit, and transfer the ending account balances from this report into their auditing software. They then use audit procedures to test these balances.