What a trial balance is
A trial balance is a list of every account in the general ledger with its balance on a date: debit balances in one column, credit balances in the other. If the books were kept by double entry, both columns add up to the same total.
How to prepare it, step by step
An example: a shop's first month
These are the balances of a shop at the end of March, after its first six entries: the owner's 5,000, shelving for 1,200, 3,000 of cash sales, 800 sold on credit, 1,000 of rent and a 400 electricity bill still to pay.
| Account | Debit | Credit |
|---|---|---|
| Cash | 5,800 | |
| Accounts receivable | 800 | |
| Equipment | 1,200 | |
| Accounts payable | 400 | |
| Owner's capital | 5,000 | |
| Sales | 3,800 | |
| Rent expense | 1,000 | |
| Electricity | 400 | |
| Total | 9,200 | 9,200 |
Cash is the 5,000 put in plus the 3,000 of cash sales, less 1,200 of shelving and 1,000 of rent: 5,800 on the debit side. The totals match, so the month is ready for the statements.
What it catches, and what it cannot
A trial balance that does not balance shows that something is wrong: an entry with unequal sides, a balance in the wrong column, a sum added badly. One that balances does not prove the books are right: an entry recorded twice, left out, or sent to the wrong account still balances.
Two columns or four
Many trial balances show four columns: the sums of each account's debits and credits, and then its balance. The sums show how much moved; the balances are what go into the statements. Both pairs of totals must match.
From the trial balance to the statements
The income and expense balances make the income statement; the asset, liability and equity balances make the balance sheet. In the example, 3,800 of sales less 1,400 of expenses leave a profit of 2,400, which joins equity on the balance sheet.
A trial balance that always balances
Aconta Online refuses any entry whose debits and credits differ, so its trial balance always balances. It shows the sums and the balance of every account, up to date with each entry, and downloads as a spreadsheet. What is left to you is checking that each movement was recorded once, in the right account.
Questions
Why does my trial balance not balance?
Look for an entry whose debits and credits differ, a balance placed in the wrong column, or an account left out. Start from the difference: if it divides by 9, two digits may have been swapped.
How often should I prepare a trial balance?
At least at the end of each month, before closing it, and always before preparing the statements.
Is a trial balance a financial statement?
No. It is a working check; the statements made from it are the income statement and the balance sheet.