The trial balance

At the end of an accounting period, the accounts of asset, expense, or loss should each have a debit balance, and the accounts of liability, equity, revenue, or gain should each have a credit balance. However, certain accounts of the former type also may have been credited and certain accounts of the latter type also may have been debited during the accounting period when related business transactions reduce their respective accounts’ debit and credit balances, an opposite effect on those accounts’ ending debit or credit balances. On a trial balance worksheet, all of the debit balances form the left column, and all of the credit balances form the right column, with the account titles placed to the far left of the two columns.

Types of Trial Balance

There are three main types of trial balance:

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  The unadjusted trial balance
  
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  The adjusted trial balance
  
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  The post-closing trial balance
  

All three of these types have exactly the same format but slightly different uses. The unadjusted trial balance is prepared on the fly, before adjusting journal entries are completed. It is a record of day-to-day transactions and can be used to balance a ledger by adjusting entries.
Once a book is balanced, an adjusted trial balance can be completed. This trial balance has the final balances in all the accounts, and it is used to prepare the financial statements. The post-closing trial balance shows the balances after the closing entries have been completed. This is your starting trial balance for the next year.
Trial Balance vs. Balance Sheet
The key difference between a trial balance and a balance sheet is one of scope. A balance sheet records not only the closing balances of accounts within a company but also the assets, liabilities, and equity of the company. It is usually released to the public, rather than just being used internally, and requires the signature of an auditor to be regarded as trustworthy.
A trial balance is a less formal document. There are no special conventions about how trial balances should be prepared, and they may be completed as often as a company needs them. A trial balance is often used as a tool to keep track of a company’s finances throughout the year, whereas a balance sheet is a legal statement of the financial position of a company at the end of a financial year.
After all the ledger accounts and their balances are listed on a trial balance worksheet in their standard format, add up all debit balances and credit balances separately to prove the equality between total debits and total credits. Such uniformity guarantees that there are no unequal debits and credits that have been incorrectly entered during the double entry recording process. However, a trial balance cannot detect bookkeeping errors that are not simple mathematical mistakes. If equal debits and credits are entered into the wrong accounts, a transaction is not recorded, or offsetting errors are made with a debit and a credit at the same time, a trial balance still would show a perfect balance between total debits and credits.
A trial balance can be used to detect any mathematical errors that have occurred in a double entry accounting system. If the total debits equal the total credits, the trial balance is considered to be balanced, and there should be no mathematical errors in the ledgers.
There are three types of trial balance: the unadjusted trial balance, the adjusted trial balance, and the post-closing trial balance. Each is used at different stages in the accounting cycle.
It depends. Companies can use a trial balance to keep track of their financial position, and so they may prepare several different types of trial balance throughout the financial year. A trial balance may contain all the major accounting items, including assets, liabilities, equity, revenues, expenses, gains, and losses.
A trial balance is a worksheet with two columns, one for debits and one for credits, that ensures a company’s bookkeeping is mathematically correct. The debits and credits include all business transactions for a company over a certain period, including the sum of such accounts as assets, expenses, liabilities, and revenues. 
Debits and credits of a trial balance must tally to ensure that there are no mathematical errors. However, there still could be mistakes or errors in the accounting systems. A trial balance can be used to assess the financial position of a company between full annual audits.
Accounting systems offer many opportunities to introduce errors. For a novice bookkeeper, double-entry accounting can be confusing—and even a professional accountant is vulnerable to hitting the Enter key at the wrong time or accidentally debiting $10,000 to office supplies instead of to accounts receivable. 
A trial balance is a tool accountants use to check that the general accounting ledger is accurate and to minimize errors occurring in a company’s financial statements. These internal financial reports can help verify the accuracy of a double-entry accounting system and identify errors before any critical external financial statements are issued.
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While a trial balance can’t incontrovertibly prove that no errors exist anywhere in a business’s accounting system, it can point to inaccuracies and help to identify and correct errors in accounts in the general ledger. 
What is a trial balance?
A trial balance is a list of credit entries and debit entries that businesses use to internally audit their double-entry accounting systems. The goal is to confirm that the sum of all debits equals the sum of all credits and identify whether any entries have been recorded in the wrong account.
In double-entry accounting, a credit to any account must be offset by a debit to another account. While general ledgers will list individual credit entries and debit entries for each transaction, a trial balance sums the credit balances and debit balances by account, calculating the total credit balance and debit balance at the bottom. If your general ledger is accurate, the debit balance will equal the credit balance.
Today, credit balances and debit balances are checked automatically, mostly eliminating the need to create trial balance documents. However, trial balances are still useful for accountants who need to check their work and for auditors who may need to understand which accounts to audit. 
What does a trial balance include?
A trial balance document lists all of the accounts from the general ledger, with two columns: one for debits and one for credits. A trial balance typically includes five elements:
Credits and debits to each account from transactions during the accounting period
The associated account names
The associated account numbers
The dates of the accounting period 
The total sum of all debit balances and credit balances 
In this example, the total credit balance equals the total debit balance. While this alone cannot confirm that all entries have been entered correctly, it’s a good sign that your accounts are accurate. A discrepancy between balances means that there is an error somewhere in the accounting system.
What are adjusted trial balances?
Adjusted trial balances are a type of trial balance issued after the initial trial balance is prepared. The adjusted trial balance accounts for information that is missing or misrepresented in the general ledger and can correct for errors identified in the initial report. 
For example, let’s say that you bought $600 worth of office supplies on a personal credit card, resulting in a $600 credit excess on your unadjusted trial balance. The adjusted trial balance would correct the error by adding a $600 debit to expenses. 
Adjusted trial balances can also remove advanced payments or take into account liabilities that have not been incurred during the accounting period but should be factored into financial reports. These types of adjustments don’t necessarily correct for errors in the unadjusted balance, but they can result in more accurate reporting by identifying and accounting for assets and liabilities not reflected in the general ledger.
When should a business use a trial balance?
With modern accounting tools, credit and debit balances are checked against each other automatically, making trial balances somewhat obsolete. However, some businesses prepare trial balances as an internal check before issuing official financial statements. Trial balances can help an accounting team generate a balance sheet, check the accuracy of their double-entry accounting practices, and identify any errors in their accounting, such as transactions that have been entered in the wrong account.
Business owners may also choose to prepare a trial balance in the middle of a standard reporting period to assess financial position and ensure that accounting systems are on track.
Trial balances have three main uses: identifying errors, providing a summary of account performance, and helping accounting teams prepare financial statements. By assessing whether or not debit balances and credit balances are equal, trial balances can audit an accounting system’s accuracy, uncovering errors occurring in journal entries and identifying transactions that have been entered in the wrong account. Trial balances can summarize account performance, providing an overview of individual account balances. Trial balances gather information that aids in the preparation of financial statements. Bookkeepers or accountants will prepare a trial balance before issuing formal financial statements. Business owners can also use them as a summary of account performance during an accounting period.
What are the parts of trial balance?
Trial balance sheets contain all of a business’s accounts that experience debits or credits during a given reporting period, the amount credited or debited to each account, the account numbers, the dates of the reporting period, and the total sums of debits and credits entered during that time.
A trial balance is a financial report showing the closing balances of all accounts in the general ledger at a point in time. Creating a trial balance is the first step in closing the books at the end of an accounting period.
All the ledger accounts (from your chart of accounts) are listed on the left side of the report. You can omit any accounts that haven’t been used during the period. Then there’s a column with debit balances, and one with credit balances. The total debits and credits should match.
Trial balances are used to prepare balance sheets and other financial statements and are an important document for auditors. A trial balance is done to check that the debit and credit column totals of the general ledger accounts match each other, which helps spot any accounting errors.
If the totals don’t match, a missing debit or credit entry, or an error in copying over from the general ledger account may be the cause. But there could still be mistakes or errors in the accounting system even if the amounts do match. A bookkeeper or accountant uses a trial balance to double-check things are correct.
An initial trial balance report is called an unadjusted trial balance. After adjustments have been made to correct any errors, it’s called an adjusted trial balance and is used to prepare other financial statements.