What Is a Trial Balance? Definition and Trial Balance Example

A trial balance is a tool in double-entry accounting that accountants use to quickly check their bookkeeping system and ensure that the numbers add up. To perform a trial balance, you first import two columns of data into a new sheet—the debit column (also called assets or accounts receivable) and the credit column (also called liabilities or accounts payable). Then you compare the totals at the bottom. For a ledger to be accurate, the debit and credit columns should cancel each other out and equal zero. If the numbers do not equal zero in the trial balance, you know that something is missing and you can recheck the numbers.

Here’s a step-by-step example of a trial balance in action:

1. 1. Your company makes a purchase. Let’s say your company makes a purchase of a new piece of manufacturing equipment for $1,000. It’s essential in business that you record every purchase (or successful sale) in the accounting records so that you can stay informed of the company’s financial health.
2. 2. You record the purchase in the books. You record the transaction in the general ledger accounts in your accounting software. In the double-entry accounting system, you would record the purchase as a journal entry in two separate areas: the credit balance as a purchase (–$1,000) and the debit balance as a new asset (+$1,000).
3. 3. You perform a trial balance. Later on in the accounting cycle, it will be time to do a trial balance to make sure your account balances are equal before you close the books and prepare your official documents (such as a balance sheet, cash flow statement, and income sheet or income statement) at the end of an accounting period. When you do your initial review of the debit and credit entries, it’s called an unadjusted trial balance sheet.
4. 4. You finalize the trial balance. When you review the credit and debit entries, if the account total isn’t zero, you know that you missed recording a business transaction. At that point, you can review the accounts to find the discrepancy—whether it’s a missing invoice or a forgotten asset. Once you find the missing transaction, you can update the worksheet, adjusting entries until you have an accurate document with a zero ending balance, called an adjusted trial balance sheet.

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