What is a trial balance? It is an accounting report that lists all the nominal accounts in two columns either debit or credit balances. With double entry bookkeeping, you make two entries one credit and the other debit. When all the debits and credits are added up, they will be equal.
Prepare a Trial Balance Report
Most software accounting packages include a trial balance as part of their reports section and due to the software always posting double entry the report will balance. To run the report, you will need to select the period end date that is required; this may be month, quarter or year-end.
If a manual accounting system is used, it is possible that a mistake has been made and the report is not equal on both sides. The difference between the credit and debit will have to be found and ensure that it balances.
The report will only show the totals of the postings to the accounts if a user error has occurred or a transaction is posted to the wrong account; it will not be visible. A transaction might also be completely missing from the report. It is therefore important that checks be put in place to check some individual ledgers.
Trial Balance uses
The report is useful to accountants and auditors at the end of the year to see a complete picture of the company in one place. Adjusting journal entries can then be completed if needed, and a new report run.
The other main use is if you are switching accounting packages, the figures from the report can be used to enter the opening balances in the new accounting software.
What is a Trial Balance – Format
The Trial Balance format includes the following information:
- Report header: Company Name and date
- Columns: Ledger account codes if used and names, credit and debit.
Trial Balance Example
Below is an example which was downloaded from Quickbooks into Excel. The figures include all the balances from both the balance sheet and Profit and Loss account. When all the figures are totalled at the bottom of the report, the credits and debits will balance.
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