Trial Balance (or TB) - What is it?

Snapshot List of all General Ledger Accounts and Balances / Proof that Accounting Debits = Credits / ....Exciting!

> Accounting Dictionary   > What is a Trial Balance?

'Trial Balance'. Sounds good, eh?

It conjures up the nail-biting, pyschological tension of a courtroom drama.  A crime of passion fuelled by a lover's jealousy. The jury is divided : Guilty or Innocent?...

But it's not that.

No, this is the world of Accounting. The reality is far more exciting than that sentimental nonsense.

1. What is a Trial Balance?

A Trial Balance is a list of ALL General Ledger Accounts and their balances - Debit or Credit - extracted at a point in time.

Debit balances are usually presented as positive figures, Credit balances as negative or bracketed figures.

Accounts will be grouped on the TB by type eg. Income accounts, Costs, Expenses, Assets, Liabilities etc.

Reviewing a Trial Balance is a key Financial Internal Control.

It's called a 'Trial' because it's a test to prove that Double Entry bookkeeping is complete ie. the total value of debits = the total value of credits.

That need to test originates from back in the olde days when accounting was manual and more prone to human error and omission than now (in theory!).

(Indeed most modern accounting systems will not allow a transaction to be created if Debits do not equal Credits.)

2. Trial Balance - Example with Alternative Layouts


3. What Is The 'Trial' TB Test?

The test can be presented in 2 ways depending on the format of the TB:

Either - does the Total value of the Debit Balances equal the Total value of the Credit Balances, or, to put it another way

...on the basis that Debits are positive and Credits are negative, does the total of the Trial Balance = Zero?

If the answer is 'No' then there's a problem to investigate!

In a modern accounting system this is rare but in our experience the most likely cause will be the TB Report itself rather than a processing issue.  It may be, for example,  that a new Ledger Account has been created in the Chart of Accounts but the TB Report configuration has not been amended to pick it up.  (we told you it was exciting)

4. Extracting and Reviewing  the Trial Balance

A TB from an automated finance sytem can usually be extracted at any time but is usually done at month end once it has been confirmed that Month End processes are complete eg. interfaces with the Sales and Purchase Ledgers.

A quick review at this time can pay dividends and save work - and embarrassment - later!

Questions: Does it look right?   For example:  Why is the Wongel Sales Account only $'000's when it's usually $'000'000's?

Or Why are Repairs £0 when they've never been zero before?

5. Using - and Controlling - the Trial Balance

A reviewed and signed off Trial Balance is a primary tool in the Finance Department.

• It is usually the starting point for preparing Monthly Management Accounts and Results Packs. The TB will often be uploaded into Excel or BI software and linked to Account Templates through Lookups.

• With different users accessing data independently it is imperative that only one official version is maintained - and controlled - centrally! The biggest crime of the Finance Team is to lose credibility of the numbers it produces.

• the Auditors will ask for it on Day 1 of the Audit

> Accounting Dictionary   > What is a Trial Balance