The trial balance

• A trial balance is a list of the balances on all ledger accounts (and the cash book) on a particular date.
• Uses: checks the arithmetical accuracy of the double entry, and is the starting point for the financial statements.
• Limitation: six types of error leave the trial balance in agreement — commission, compensating, complete reversal, omission, original entry, principle.
• Prepare a trial balance from a list of balances, and correct one that has items on the wrong side.

A list of balances on one date

After all the accounts are balanced, each debit balance is listed in the debit column and each credit balance in the credit column. Because every transaction had an equal debit and credit, the two columns should agree. A trial balance is a statement, not an account, and it is dated “at” one day.

Debit balances: assets, expenses, drawings. Credit balances: liabilities, capital, income.

Use the double entry rules to decide the column. Inventory in the trial balance is the opening inventory (the closing figure is given as a note). Returns: sales returns are debit, purchases returns are credit. A bank overdraft is credit.

Worked example

Prepare a trial balance at 31 December 2025 for Hana from these balances: capital $38,000; drawings $6,200; premises $30,000; motor vehicle $9,500; inventory 1 January 2025 $4,300; purchases $28,700; revenue $52,400; sales returns $600; purchases returns $900; wages $8,800; general expenses $2,150; trade receivables $3,850; trade payables $3,100; bank (in funds) $2,700; bank loan $2,400.

Move each item to its correct side

When a trial balance does not agree because items are on the wrong side, check every item against the rules and redraft it.

Worked example

A trainee prepared this trial balance. Redraft it correctly.