Trial balance

The balance extracted for any single account is the net of all of the debit and credit entries in that account.

If double entries have been posted correctly then the total of all debit entries made to all of the accounts in the general ledger must equal the total of all credit entries. It follows that if balances are extracted for every account in the general ledger the sum of the debit balances must equal the sum of the credit balances.

A trial balance is a list of all the debit balances and all the credit balances on the accounts in the main ledger. A trial balance is ‘extracted’ from the main ledger simply by listing the balances on every account.

The normal method of presentation is to present the balances in two columns, one for debit balances and one for credit balances.

•  Debit balances are assets, expenses or drawings.

•  Credit balances are liabilities, income or equity (capital including share capital and reserve accounts in the case of a company).

Example: Abbas – Trial balance as at (it would be usual to give a date)

 

The purpose of a trial balance

A trial balance has two main purposes.

•  It is a starting point for producing a statement of comprehensive income and a statement of financial position at the end of an accounting period.

•  It is a useful means of checking for errors in the accounting system. Errors must have occurred if the total of debit balances and total of credit balances on the main ledger accounts are not equal.