what is trial balance

A trial balance is a statement prepared with debit and credit balances of ledger accounts to test the arithmetical accuracy of the books. A company prepares a trial balance periodically, usually at the end of every reporting period. The general purpose of preparing a trial balance is to ensure the entries in a company's bookkeeping system are mathematically correct.

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A statement of all debits and credits in a double-entry account book, with any disagreement indicating an error.

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A 'Trial Balance'is a list of all the General ledger accounts (both revenue and capital) contained in the ledger of a business. This list will contain the name of the nominal ledger account and the value of that nominal ledger account. The value of the nominal ledger will hold either a debit balance value or a credit balance value. The debit balance values will be listed in thedebitcolumn of the trial balance and thecreditvalue balance will be listed in the credit column. Theprofit and loss statementandbalance sheetand other financial reports can then be produced using the ledger accounts listed on the trial balance.

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A 'Trial Balance'is a list of all the General ledger accounts (both revenue and capital) contained in the ledger of a business. This list will contain the name of the nominal ledger account and the value of that nominal ledger account. The value of the nominal ledger will hold either a debit balance value or a credit balance value. The debit balance values will be listed in thedebitcolumn of the trial balance and thecreditvalue balance will be listed in the credit column. Theprofit and loss statementandbalance sheetand other financial reports can then be produced using the ledger accounts listed on the trial balance.

The name comes from the purpose of a trial balance which is to prove that the value of all the debit value balances equal the total of all the credit value balances. Trialing, by listing every nominal ledger balance, ensures accurate reporting of the nominal ledgers for use in financial reporting of a business's performance. If the total of the debit column does not equal the total value of the credit column then this would show that there is an error in the nominal ledger accounts. This error must be found before a profit and loss statement and balance sheet can be produced.

The trial balance is usually prepared by a bookkeeper or accountant who has useddaybooksto record financial transactions and then post them to the nominal ledgers and personal ledger accounts. The trial balance is a part of thedouble-entry bookkeepingsystem and uses the classic'T' accountformat for presenting values.

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