Glossary
What is a trial balance?
A trial balance lists the closing balance of every account in the books at a date, with debits in one column and credits in the other. In double-entry bookkeeping the two columns should total the same.
The profit and loss and the balance sheet are both built from the trial balance. Totals that agree show the double entry is complete; they do not show the entries are right. A cost posted to the wrong account, or a transaction missed altogether, still leaves a trial balance that agrees.
Worked example
Example · illustrative figures
| Account | Debit | Credit |
|---|---|---|
| Bank | A$25,000 | |
| Trade debtors | A$12,000 | |
| Trade creditors | A$8,000 | |
| Revenue | A$60,000 | |
| Expenses | A$31,000 | |
| Total | A$68,000 | A$68,000 |
Debits and credits agree: the double entry is complete. But it does not prove the A$12,000 of debtors will be collected, or that expenses are in the right accounts.
How to read it
The trial balance is the starting point for the profit and loss (the revenue and expense accounts) and the balance sheet (the asset, liability and equity accounts). Accountants use it to find errors, plan adjusting entries and prepare the year-end accounts.
Common mistakes
- Assuming a balanced trial balance means the books are correct.
- Posting both sides of a journal to the same side (two debits), which breaks the balance and points straight to the mistake.
How it shows in Nella
Nella’s Financial Controller can show the trial balance for a period and uses it to check close readiness. See month-end close and are my books ready to close?
Related
Nella provides financial information and education, not accounting or tax advice.
See it on your own numbers
Nella works these figures out from your books every month. Nella Pro is free for 60 days, no card, including the entries you approve posted to your books. After that, Nella Free keeps reading your books, with no time limit.
Start free