TRIAL BALANCE IN ACCOUNTING

If the journal entries are error-free and were posted properly to the general ledger, the total of all of the debit balances should equal the total of all of the credit balances. If the debits do not equal the credits, then an error has occurred somewhere in the process. The total of the accounts on the debit and credit side is referred to as the trial balance.
To calculate the trial balance, first determine the balance of each general ledger account as shown in the following example:

General Ledger

Cash Sep   1     7500 17 400 25 425 Sep   15     1000 28 500 Bal.    6825

Accounts Receivable Sep   17      700 Sep   25     425 Bal.    275

Parts Inventory Sep   8      2500 Sep   18     275 Bal.    2225

Accounts Payable Sep   28     500 Sep   8      2500   Bal.    2000

Capital Sep   1      7500   Bal.    7500

Revenue Sep   17     1100   Bal.    1100

Expenses Sep   15     1000 Sep   18     275 Bal.    1275

Once the account balances are known, the trial balance can be calculated as shown:

Trial Balance

Account Title	Debits	Credits
Cash	6825
Accounts Receivable	275
Parts Inventory	2225
Accounts Payable		2000
Capital		7500
Revenue		1100
Expenses	1275
	10600	10600

In this example, the debits and credits balance. This result does not guarantee that there are no errors. For example, the trial balance would not catch the following types of errors:

• Transactions that were not recorded in the journal
• Transactions recorded in the wrong accounts
• Transactions for which the debit and credit were transposed
• Neglecting to post a journal entry to the ledger

If the trial balance is not in balance, then an error has been made somewhere in the accounting process. The following is listing of common errors that would result in an unbalanced trial balance; this listing can be used to assist in isolating the cause of the imbalance.

• Summation error for the debits and credits of the trial balance
• Error transferring the ledger account balances to the trial balance columns
  • Error in numeric value
  • Error in transferring a debit or credit to the proper column
  • Omission of an account
• Error in the calculation of a ledger account balance
• Error in posting a journal entry to the ledger
  • Error in numeric value
  • Error in posting a debit or credit to the proper column
• Error in the journal entry
  • Error in a numeric value
  • Omission of part of a compound journal entry

The more often that the trial balance is calculated during the accounting cycle, the easier it is to isolate any errors; more frequent trial balance calculations narrow the time frame in which an error might have occurred, resulting in fewer transactions through which to search.