A trial balance is a list of every account in the ledger with its balance at a set date, shown in two columns: debits and credits. Because every transaction in double-entry bookkeeping has equal debit and credit sides, the two columns should add up to the same total. A trial balance that balances shows the books are arithmetically sound, and it is the starting point for the profit and loss account and the balance sheet. It is often shortened to TB.
Why a trial balance matters
Accountants run a trial balance at every month end and year end. If the totals don't agree, something has been posted to one side only or entered wrongly, and it is easier to find before the reports go out.
It is also the bridge to the reports. Each line goes to either the profit and loss account or the balance sheet. Management accounts are built from the month-end trial balance, and year-end accounts from the final, adjusted one.
Trial balance example
A small UK limited company extracts its trial balance at its 31 March year end, before any adjustments.
| Account | Debit | Credit |
|---|---|---|
| Office equipment (fixed asset) | £6,000 | |
| Trade debtors (asset) | £9,600 | |
| Bank current account (asset) | £18,400 | |
| Trade creditors (liability) | £4,200 | |
| VAT control (liability) | £3,100 | |
| Share capital (equity) | £100 | |
| Retained earnings (equity) | £12,500 | |
| Sales (income) | £96,000 | |
| Cost of sales (expense) | £38,000 | |
| Wages and salaries (expense) | £30,000 | |
| Rent (expense) | £9,600 | |
| General overheads (expense) | £4,300 | |
| Total | £115,900 | £115,900 |
Both columns total £115,900, so it balances. Assets and expenses carry debit balances; liabilities, equity and income carry credit balances. Sales of £96,000 less £81,900 of costs gives a profit of £14,100. Retained earnings holds profit from earlier years; this year's joins it when the year is closed.
Trial balance format
There is no prescribed layout, but most trial balances have:
- Heading: the business name and the date, such as "Trial balance at 31 March".
- Account code and name: one line per account, in chart of accounts order: assets, liabilities, equity, income, expenses.
- Debit and credit columns: each balance in one column only. Some software uses a single column, with credits as negatives.
- Totals: one per column, which should match.
What a trial balance won't catch
A balanced trial balance proves debits equal credits, not that the books are right. These errors slip through:
- Omission: a transaction left out entirely.
- Commission: the right type of account but the wrong one, such as the wrong customer.
- Principle: the wrong type of account, such as a laptop posted to repairs, not fixed assets.
- Original entry: the same wrong amount on both sides, such as £540 entered as £450.
- Compensating errors: two equal mistakes that cancel out.
- Complete reversal: the right accounts and amount, with debit and credit swapped.
Bank reconciliations and debtor and creditor reviews catch most of them.
Adjusted vs unadjusted trial balance
The example above is an unadjusted trial balance: balances as they stand after day-to-day bookkeeping. At period end the accountant posts journals for accruals, prepayments, deferred income, depreciation and stock. The result is the adjusted trial balance, which the accounts are prepared from. The ACCA's guide to adjustments covers each one.
A £480 accrual for March electricity, for example, adds £480 to both columns: debit electricity, credit accruals. Both totals become £116,380.
Trial balance vs balance sheet
A trial balance is an internal working document; a balance sheet is a financial statement.
| Trial balance | Balance sheet | |
|---|---|---|
| Purpose | Checks debits equal credits | Shows the financial position |
| Accounts included | Every account, including income and expenses | Assets, liabilities and equity only |
| Layout | Debit and credit columns | Net assets equal to capital and reserves |
| Who sees it | Bookkeeper and accountant | Directors, lenders and Companies House |
How Briefcase Ledger handles trial balances
Briefcase Ledger builds the trial balance straight from the ledger for a month, quarter, year or custom dates, using the company's financial year end. Compare it with last year or the previous period, and export it to CSV, Excel or PDF. Earlier years' profit rolls into retained earnings for you, with no year-end closing journal to post.
Moving a limited company from Xero, QuickBooks Online, Sage, FreeAgent or a spreadsheet? Upload its trial balance at the changeover date. Ledger proposes how each account maps and you confirm. Ledger checks that debits and credits agree, shows any difference to fix, and posts a balanced file as the opening position. See moving to Briefcase Ledger.
Frequently asked questions
What is a trial balance in simple terms?
It is a list of all your account balances on one date, split into debits and credits. If the two totals match, the double entry has been recorded consistently.
What if a trial balance doesn't balance?
Something has been posted to one side only, with different amounts on each side, or left off the list. If the difference divides exactly by 9, look for transposed digits; if it is twice an amount in the books, look for an entry on the wrong side.
Is a trial balance a financial statement?
No. It is a working document used to prepare the financial statements: the profit and loss account and balance sheet. It is not published or filed.
Which accounts have debit balances?
Assets and expenses normally have debit balances. Liabilities, equity and income normally have credit balances. An overdrawn bank account is a common exception: it shows a credit balance.