# The trial balance

> Every 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.

Source: https://lopifi.com/learn/the-trial-balance
Part of: Lopifi — US GAAP books on autopilot, reviewed by a CPA (https://lopifi.com)

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**What is a trial balance and what does it actually prove?** Every 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.

Net each account onto its own side, list them all, and sum the two columns. If double-entry was obeyed, the totals are identical — not close, identical. That is the [trial balance](https://lopifi.com/md/glossary/trial-balance), and it is the first thing an accountant looks at every month. It is a working paper, not a financial statement: it is never published, and outside the finance team only the auditors ever see one.

*[The accounting cycle, at: trial-balance]*

*[Trial balance]*

Northwind at 30 September, before adjustments. Twelve accounts, and the two totals agree.

*[Interactive figure: trial balance]*

Northwind's unadjusted trial balance, read card by card into two drums. They total the same, so every entry was posted in balance — which proves the arithmetic, not that every entry is right.

## What it proves, and what it does not

| It proves | It does not prove |
| --- | --- |
| Every entry had equal debits and credits | That the entry went to the right account |
| Nothing was lost between journal and ledger | That anything was recorded at all |
| The columns were added correctly | That amounts are right — 4,800 on both sides ties perfectly |
| No one-sided entry was posted | That the period is right — an October invoice booked in September ties |

Those blind spots have names, and it is worth knowing them because they are what review is for. An *error of omission* never entered the books. An *error of commission* hit the right type of account but the wrong one — a utilities bill in rent. An *error of principle* hit the wrong type — a van in repairs expense. A *compensating error* is two mistakes that cancel. An *error of original entry* got the amount wrong on both sides. A *reversal of entries* swapped the debit and the credit. All six tie.

> **A trial balance that ties is necessary and nowhere near sufficient. It rules out one class of error completely, and says nothing at all about the others.**

## When it does not tie

A difference is not a number to stare at — it has a shape, and the shape names the mistake. Learn these three and you will find most breaks in under a minute.

| The difference | What it usually means | What to do |
| --- | --- | --- |
| Divisible by 9 | Two digits transposed — 8,400 typed as 4,800 | Difference ÷ 9 gives the gap between the two swapped digits; look for figures that contain such a pair |
| Even, and half of it matches a posted amount | That amount was posted to the wrong side — it moved the gap by twice its size | Search for an amount equal to half the difference |
| Equal to a single posted amount | One side of an entry was left out, or a line was posted twice | Search for exactly that amount |

Read the difference before you read the ledger.

**Exercise — This trial balance does not tie.** One figure was typed wrong on the way in. Do not hunt line by line — read the difference first, then look only at the accounts that could produce it. Type it in the workbook at https://lopifi.com/playground.

> **The mistake to avoid.** Never force a trial balance with a plug to a [suspense account](https://lopifi.com/md/glossary/suspense-account) and move on. The difference is information about a real error — and the error is still in the books afterwards, now with a second one on top of it.

**Check yourself.** The $450 power accrual is debited to rent expense instead of utilities expense. Does the trial balance tie?

- No — the rent account is now wrong. — The trial balance does not know which account is right. It only knows the debit and the credit are equal, and they are.

- Yes. It is an error of commission, and only a review of the accounts will find it. — Debits still equal credits — the debit just landed in the wrong expense. Net income is even unchanged; the line items are not.

- It is out by 450. — Nothing was one-sided. Both columns carry the same amount, so the totals agree.

- **Lesson:** 7 of 13 — 10 min
- **Terms taught:** [Trial balance](https://lopifi.com/md/glossary/trial-balance), [Normal balance](https://lopifi.com/md/glossary/normal-balance), [General ledger](https://lopifi.com/md/glossary/general-ledger), [Materiality](https://lopifi.com/md/glossary/materiality), [Suspense account](https://lopifi.com/md/glossary/suspense-account)
- **Previous:** [Posting to the ledger](https://lopifi.com/md/learn/posting-to-the-ledger)
- **Next:** [Cash, accrual and cut-off](https://lopifi.com/md/learn/cash-versus-accrual)
- **The course:** https://lopifi.com/learn