What it means
A trial balance is a list of every account in your books and its balance on one date. Debit balances go in one column, credit balances in the other, and the two columns should total the same.
It's a snapshot of the whole ledger before it's arranged into financial statements. The name comes from its original job, a trial to see whether the books balance.
You run it at month end, after the month's entries are posted. Assets and expenses normally carry debit balances. Liabilities, equity and revenue normally carry credit balances.
Equal totals prove less than they seem to. They show that every entry had equal debits and credits, nothing more. An expense posted to the wrong account, or a bill never entered at all, still leaves a trial balance that balances. The real review is reading down the list for balances with the wrong sign, accounts that should be zero and big swings from last month.
Acme's March trial balance shows $1.2M in each column, so it balances. Reading down, one bank account shows a $3,000 credit balance. The account isn't overdrawn, so that's an error, and it turns out a transfer was recorded out of the wrong account. Fixing it changes no totals, but it does change the balance sheet.
The adjusted trial balance, after accruals and other month-end entries, is what the balance sheet and P&L are prepared from. It's also the first file a CPA asks for at year end, because the tax return starts there too.
Why it matters. It's the starting point for the statements, and the file a CPA, auditor or tax preparer asks for first. If it doesn't balance, nothing built from it can be right.
Try it with your numbers
Change any number. The working below updates as you type.
Debits (assets + expenses) = Credits (liabilities + equity + revenue)Net of contra accounts like accumulated depreciation.
Opening equity, before this year's result.
Out of balance by
$90.00
How it’s worked out
- 1Total debits$2,500,000.00 assets + $900,000.00 expenses$3,400,000.00
- 2Total credits$400,000.00 liabilities + $2,000,000.00 equity + $999,910.00 revenue$3,399,910.00
- 3Difference$3,400,000.00 − $3,399,910.00$90.00
- 4Divisible by 9?$90.00 ÷ 9Yes: look for transposed digits (54 for 45) or a slid decimal
- 5Half the difference$90.00 ÷ 2Look for $45.00 on the wrong side
These are clues, not proof, and work best when there's one error. Also look for a missing account or a balance carried to the wrong column. Equity here is opening equity: this year's profit is still in revenue and expenses.
The entry, worked
A $3,000 transfer was paid out of the operating account but posted against the payroll account, leaving payroll with a $3,000 credit balance.
| Account | Debit | Credit |
|---|---|---|
| Cash — payroll account | $3,000.00 | |
| Cash — operating account | $3,000.00 | |
| Total | $3,000.00 | $3,000.00 |
The payroll account's $3,000 credit balance goes to zero and the operating account takes the transfer; the trial balance totals don't move.
Common questions
Can modern accounting software produce an unbalanced trial balance?
Rarely, since it won't post an entry that doesn't balance. The useful checks are the ones it can't do: balances with the wrong sign, accounts that should be zero, and swings from last month.
What's an adjusted trial balance?
The trial balance after month-end adjustments like accruals, prepaid amortization and depreciation. It's the one the financial statements are prepared from.
Why doesn't retained earnings on the trial balance match the balance sheet?
Before the year is closed, the trial balance shows retained earnings at its opening balance and the year's revenue and expenses separately. The balance sheet adds the year-to-date result to equity, so the two only agree once you count the P&L.
Where it comes up
The glossary entries, founder guides and lessons on this site that use the term and link here.
- Trial balanceEvery account's balance in two columns, proving that total debits equal total creditsGlossary
- Form 1120: what to give your tax preparer, and whenWhat a startup hands its tax preparer for Form 1120: closed books, a balance sheet that ties to Schedule L, book-to-tax items, ownership and 1099s.Guide · 5 min
- General ledger and double-entry bookkeeping, explainedHow double entry works: journal entries, debits and credits, normal balances, running balances, the trial balance, and why posted entries are reversed.Guide · 6 min
- Chart of accounts for startups: a starting templateA starting chart of accounts for a US startup: number ranges, the expense accounts you need, and when to add an account versus a class or tracking tag.Guide · 6 min
- The trial balanceEvery account, netted onto one side, with both columns summed. It proves the arithmetic, and you need to know exactly how much it does not prove.Lesson 7
- Adjusting entriesThree entries nobody sends an invoice for, made on the last day of the month, that turn a record of transactions into a set of accounts.Lesson 9
- Trial balance checkerBalances — and then the harder question: is anything sitting on the wrong side of its normal?Tool
Read further
General information for US companies, not tax, legal or accounting advice. Check the specifics with a CPA before you act on them.