Trial balance is a term used in accountancy and double-entry bookkeeping. This method of bookkeeping requires that every transaction has both a debit and a credit entry, and the trial balance is one method of seeing if the two sides of the books 'balance'.
A trial balance is a list of balances at a certain point in time arranged according to whether they are debit balances or credit balances. An example of a simple trial balance is shown below:
Trial Balance of XYZ & Co at 31.12.2001
Heat and light 500
Motor Vehicles 2,000
It should be noted that because a trial balance balances does not mean that there are no errors in the acccounts. A transaction may have been omitted completely, for example, without affecting the balancing of the trial balance.
Some errors which might be revealed by a trial balance include errors in additions, using one figure for the debit entry and another figure for the credit entry, or entering only one side of a transaction.
A trial balance is a common tool for bookkeepers and accountants when preparing final accounts of a business, as it enables balances to be picked up easily for transferring to the balance sheet and profit and loss account. It also simplifies analysis and review of the account balances.
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