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Get to Grips With Book Keeping: Trial balance

by Andy Lymer and Nishat Azmat

The trial balance is not a financial statement, or even a formal part of the double-entry system really but a list of all the debit and credit total balances posted from the ledger accounts, at the end of a period. There is no particular order for the list in the trial balance, but adopting a logical sequence of extracting and listing the balances should help minimise any errors.

The purpose of the trial balance is to help find any errors that need to be amended in order to be able to then go on to prepare the final financial statements, i.e. the balance sheet and the profit and loss account.

The trial balance is a good example of an internal control, as it keeps a check on the various ledger totals. If the trial balance does not equate, then an error or errors have taken place in your processing of your data somewhere and therefore the ledgers will need to be examined to find this error. Errors which will cause the trial balance totals to be unequal are as follows:

-arithmetic error when totalling the balances of the ledger
-correct amount on one side and an incorrect amount on the other, i.e. DR 320 but CR 322 by mistake
- Not including both entries, only writing entry on one side, and omitting the other
- Including both entries on the same side, instead of a DR and a CR you have two CR entries.

And errors which will leave the trial balance totals equal are as follows:

- Mistakes of the same amounts in both the debit and credit entries
-Omitting the transaction all together
- The wrong ledger being debited with the correct amount.


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