What is a trial balance?
A trial balance is a kind of report that list all the balances in a company’s ledger accounts at a specific point in time. It is mainly used to check the accuracy of the accounting records and to identify any errors. It is not an official financial statement, and it is not usually distributed outside of the company. A trial balance helps to identify errors if the total debit balances on the trial balance do not equal the total credit balances; a trial balance help to identify and correct any errors that may have been made. It also is used to prepare to adjust entries. Adjusting entries are journal entries made at the end of an accounting period to correct errors or to record transactions that have not yet been recorded.
How a Trial Balance Works
A trial balance is a way to check the accuracy of the double-entry accounting system. It compares the total of debits and credits in the ledgers. If they match, the trial balance is balanced, and there are no arithmetic errors. However, this does not guarantee that the accounting system is error-free. Some errors, such as wrong classification or omission of transactions, may still affect the quality of the accounting information and are not detected by the trial balance.
Types of Trial Balance
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The unadjusted trial balance
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The adjusted trial balance
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The post-closing trial balance