Explained
It checks that entries were recorded on double-entry principles without arithmetic errors, and is the base from which the income statement and balance sheet are built. Balancing does not prove the books are free of every error: an entry posted to the wrong account still balances.
Example
If debits total 485,000 and credits total 485,000, the trial balance balances.
Related terms
- Double-entry bookkeepingDouble-entry bookkeeping records every financial effect in at least two accounts — a debit and a credit of the same amount.
- Income statementAn income statement shows a business’s revenue and expenses over a period; the difference is the net profit or loss.
- Balance sheetA balance sheet shows a business’s assets, liabilities and equity at a date; assets always equal liabilities plus equity.