Define the Trial Balance

Trial balance

A trial balance is a statement showing a list of debit (DR) and credit (CR) balances of accounts extracted from the ledger to check the arithmetical accuracy of the double entry system. It records business transactions at any given date.

Purpose of a trial balance

1. Trial balance acts as the first step in the preparation of financial statements. It is a working paper that accountants use as a basis while preparing financial statements.
2. Trial balance ensures that for every debit entry recorded, a corresponding credit entry has been recorded in the books in accordance with the double entry concept of accounting. If the totals of the trial balance do not agree, the differences may be investigated and resolved before financial statements are prepared. Rectifying basic accounting errors can be a much lengthy task after the financial statements have been prepared because of the changes that would be required to correct the financial statements.
3. Trial balance ensures that the account balances are accurately extracted from accounting ledgers.
4. Trial balance assists in the identification and rectification of errors.

The trial balance would appear as follows:

S/N	Name of account	DR	CR
1	Cash	XXX
2	Capital		XXX
3	Purchases	XXX
4	Sales		XXX
5	Office cleaning	XXX
6	Carriage	XXX
9	Wages	XXX
		XXX	XXX