What is trial balance

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These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. What Is a Trial Balance? The debits and credits include all business transactions for a company over a certain period, including the sum of such accounts as assets, expenses, liabilities, and revenues.

Debits and credits of a trial balance being equal ensure there are no mathematical errors, but there could still be mistakes or errors in the accounting systems.

Compare Accounts. When the trial balance does not balance, try re-totaling the two columns. If this step does not locate the error, divide the difference in the totals by 2 and then by 9. If the difference is divisible by 2, you may have transferred a debit-balanced account to the trial balance as a credit, or a credit-balanced account as a debit.

When the difference is divisible by 2, look for an amount in the trial balance that is equal to one-half of the difference. If the difference is divisible by 9, you may have made a transposition error in transferring a balance to the trial balance or a slide error. A transposition error occurs when two digits are reversed in an amount e. A slide error occurs when you place a decimal point incorrectly e. Thus, when a difference is divisible by 9, compare the trial balance amounts with the general ledger account balances to see if you made a transposition or slide error in transferring the amounts.

The trial balance is assumed to be accurate only when the total debit is equal to the credit. If there any difference in the trial balance, it signals that journal or ledger posting is not carried out efficiently. It clearly implies that there are errors and it is high time for accountants to find and correct it. The error may have occurred at any of the following stages of accounting. Trial balance is a bridge between accounting records and financial statements.

Using the trial balance, all the income and expenses related ledger accounts are compiled to create Profit and loss account and rest are used for preparing a balance sheet. There are different types of trial balance prepared at different stages of the accounting cycle.

The following are different types of trial balance. Preparing trial balance is one of the first steps towards preparing final accounts and other financial statements.

Following are the steps to prepare trial balance:. As illustrated in the above trial balance format, all the ledger accounts are represented on the left side. The closing balance of each ledger accounts is shown in the debit side or credit side in the above trial balance example. All liabilities Bank Overdraft, Secured and unsecured loans, bills payable, Outstanding Payables or expenses, Loan on mortgage etc.

Reserve fund, general reserve, provision for depreciation, Accumulated depreciation etc.