A trial balance is a list of every account in the general ledger with its closing debit or credit balance at one date. Total debits must equal total credits. It is the starting point for the financial statements and the usual format for handing a company’s books to auditors, a group or a reporting tool.
What is a trial balance?
A trial balance is a report of every account in the general ledger with its balance at a chosen date: assets, liabilities, equity, income and expenses, each in a debit or a credit column. Because every journal entry has equal debits and credits, the two columns must add up to the same total.
Many trial balances show more than the closing balance: the opening balance, the period’s debits and credits, then the closing balance. That version shows what moved in the month, not only where each account ended.
Equal totals prove less than people think. A trial balance still balances when an entry is posted to the wrong account, posted twice on both sides, left out entirely, or offset by another error of the same size. It is a first check, not proof that the books are right.
How do you prepare a trial balance?
- Post everything for the periodMake sure invoices, bills, payroll, bank entries and month-end journals are posted, so the ledger is complete for the date.
- Run the report at the period endExport every account from the chart of accounts with its balance, including accounts with a zero balance if you want a complete list.
- Check the totalsTotal debits should equal total credits. If they do not, the ledger itself is out of balance, which usually points to an import or system problem.
- Review the balancesLook for balances on the wrong side, such as a credit on a bank account, and for anything left in a suspense account.
- Adjust and mapBook the closing adjustments, then map each account to a line of the statements. The result is the adjusted trial balance the statements are built from.
What does a trial balance look like?
| Account | Debit | Credit |
|---|---|---|
| Bank | 120,000 | |
| Trade receivables | 80,000 | |
| Equipment | 200,000 | |
| Trade payables | 60,000 | |
| Share capital | 250,000 | |
| Revenue | 400,000 | |
| Salaries | 250,000 | |
| Rent | 60,000 | |
| Total | 710,000 | 710,000 |
Why does the trial balance matter for finance teams in the GCC?
Groups in the region often run different accounting systems in different companies, and sometimes keep account names in Arabic in one company and English in another. The trial balance is the format every system can produce, so it is the common starting point for group reporting, the auditors’ lead schedules and the month-end close.
Questions people ask
Is a trial balance a financial statement?
No. It is an internal working report. The financial statements are built from it, after adjustments and after each account is grouped into the lines of the statement of financial position and the income statement.
What is an adjusted trial balance?
It is the trial balance after the closing adjustments, such as accruals, prepayment releases and depreciation, have been booked. The financial statements are prepared from the adjusted version.
What should you do if a trial balance does not balance?
Find the size of the difference first, then look for a one-sided posting, a failed import or a balance typed in by hand. A modern ledger rarely goes out of balance on its own, so a difference usually points to how the data was loaded.
Can a balanced trial balance still be wrong?
Yes. Entries posted to the wrong account, left out or duplicated on both sides do not upset the totals. Reconciliations and a review of balances catch what the totals cannot.