Trial balance: definition, examples, and more

A trial balance is a way of measuring your business’s financial pulse. It’s a list of all your account balances at a specific date, and provides a straightforward way to verify that your bookkeeping is on track.

In this comprehensive guide, we’ll walk you through everything you need to know about trial balances, including why they matter, how to prepare them correctly, and what to do when things don’t quite add up. 

Let’s get started.

What is a trial balance in accounting?

A trial balance is a list of all the account balances in your company’s general ledger at a certain point in time, arranged in two columns: debits and credits. 

The fundamental principle behind a trial balance stems from double-entry bookkeeping. According to this approach to bookkeeping, every transaction affects at least two accounts. And the total debits, which typically include assets and expenses, always equal the total credits, which include liabilities, equity, and income. When you prepare a trial balance, you’re checking that this golden rule holds true across all your accounts.

As a result, a trial balance is essentially a financial health check for your business. It gives a snapshot that indicates whether your bookkeeping is mathematically sound. 

While a balanced trial balance provides some peace of mind that your records are accurate, it isn’t a guarantee that they’re totally error-free. A balanced trial balance simply confirms that for every pound recorded as a debit in your system, there’s a corresponding pound recorded as a credit. However, mistakes might still have crept in. For example, you might have posted transactions to the wrong accounts or recorded the incorrect amounts. 

Make sure you combine the trial balance with other financial management processes so that your books are always clean and reliable.

What is the purpose of a trial balance?

The trial balance serves a number of important purposes in the accounting world:

• Detecting mathematical errors: Its primary purpose is to ensure your books balance mathematically. When the debit and credit columns match, you know that every transaction has been recorded with equal debits and credits. This catches common bookkeeping mistakes, like posting only one side of a transaction or recording different debit and credit amounts.

• Preparing your financial statements: Since the trial balance provides an organised summary of all your account balances, it makes it easy to prepare your profit and loss account and balance sheet. Rather than trawling through individual ledger accounts, you have everything neatly summarised in one place.

• Identifying posting errors: While it won’t catch every mistake, a trial balance that doesn’t balance immediately flags that something’s wrong. This is much better than discovering errors later in the accounting cycle when they’re harder to trace and fix.

• Making year-end adjustments: Before finalising your annual accounts, the trial balance helps identify where adjusting entries might be needed. You can spot accounts that look unusual or require additional analysis — maybe your prepayments seem too high or certain expenses appear incomplete. Your trial balance highlights these issues.

• Assists with audit trails: For larger companies that need to conduct statutory audits, the trial balance creates a clear audit trail. Auditors use it as a starting point to understand your financial position and plan their testing procedures.

• Complying with UK standards: Under UK accounting standards, maintaining accurate records is a legal requirement. The trial balance demonstrates that you’re following proper double-entry bookkeeping principles, which supports compliance with Companies House filing requirements and HMRC. It’s also a crucial stepping stone towards preparing your statutory accounts in accordance with UK GAAP (Generally Accepted Accounting Practice) or FRS 102.

The trial balance serves as your company’s financial safety net, catching errors early and providing the solid foundation you need for reliable financial reporting.

What are the rules for the trial balance?

The following fundamental principles guide the trial balance process, working to ensure that your accounting records are consistent and reliable. As you calculate your trial balance, make sure that you:

• Adhere to the golden rule — debits must equal credits: This is the cornerstone of any trial balance. The total of all debit balances must exactly match the total of all credit balances. If they don’t match, you’ve got an error somewhere in your books that needs to be resolved before you can do anything else.
• Include all ledger account balances: Every account in your general ledger must be included, even if the balance is zero. Don’t cherry-pick the accounts you include — everything from petty cash to long-term loans has to be in there.
• Use a specific point in time: The trial balance represents balances at a particular moment, typically the last day of an accounting period. All transactions up to and including that date should be reflected, but nothing after. Think of it as a financial snapshot taken at the close of business on your chosen date.
• Follow the account classification rules:
• Debit balances typically include assets (cash, stock, debtors, fixed assets), expenses, and drawings
• Credit balances typically include liabilities (creditors, loans, accruals), income or revenue, and capital or equity accounts
• Confirm that you’ve posted your journal entries accurately: Before preparing the trial balance, ensure all your journal entries have been properly posted to the ledger accounts. Check that:
• All transactions are recorded in the correct accounts
• Amounts are posted accurately
• No entries are missing or duplicated
• Handle foreign currency properly: If your business deals in multiple currencies, convert all foreign currency balances to sterling at the appropriate exchange rate for your trial balance date, following FRS 102 guidance.
• Document any adjustments: Make a clear note of any correcting entries you need to make. The trial balance should reflect the corrected balances, and you should maintain an audit trail showing what adjustments were made and why.

What is the formula for trial balance?

The formula for a trial balance is beautifully simple:

Total debits = Total credits

This is the fundamental formula that must hold true for any trial balance to be considered accurate. If the equation doesn’t balance, it’s a sure sign that there are errors in your bookkeeping.

The beauty of this formula lies in its universal application. Whether you’re running a small sole trader business or a large company, this mathematical relationship must always hold true.

What should you do if your trial balance doesn’t balance?

If your trial balance doesn’t balance, follow these steps to try and fix the error:

• Check your arithmetic: Re-add both the debit and credit columns carefully. Simple addition errors are surprisingly common and easy to overlook. A handy tip is to work out exactly how much you’re out by. This figure often provides clues about the type of error you’re looking for.
• Search for common error patterns: If the difference is divisible by 2, you may have posted a debit as a credit (or vice versa). If it’s divisible by 9, you might have transposed numbers (you might have written 54 instead of 45).

• Check your account balances: Verify that individual account balances have been calculated correctly and transferred accurately to the trial balance.

• Look for missing entries: Ensure all transactions have been recorded. Check your source documents against your journal entries. It’s also worth picking a few transactions and following them from the original source document to the ledger accounts to ensure they’ve been recorded correctly.

Never ignore an unbalanced trial balance or try to force it to balance with a “suspense account” entry. You must find and correct the mistake before you can rely on your financial records.

What are some trial balance examples?

So, what does a trial balance look like in practice? Here are three trial balance examples:

Example 1: Small retail shop (as at 31 December 2024)

Example 2: Service business (as at 31 March 2025)

Example 3: Manufacturing company (as at 31 May 2025)

Quickfire summary

A trial balance is a list of all the account balances at a particular point in time. It’s governed by the simple equation: Total debits = Total credits. 

A trial balance is a financial health check for your business, providing an indication of whether your bookkeeping processes are accurate. It also helps to catch errors early.

Remember that while a balanced trial balance offers some reassurance that your finances are reliable, it’s not a guarantee against all errors. Make sure you use it as part of a broader approach to financial management that includes regular reconciliations, proper documentation, and periodic reviews of your accounting processes.

While the rules and examples we’ve provided offer a solid foundation, every business is unique. If you’re unsure about any aspect of your trial balance or notice regular discrepancies in your accounts, seek out professional accounting advice. A seasoned accountant will be able to make sure that your trial balance gives you the accurate insight it’s designed to offer.

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• Making Tax Digital: Everything you need to know
• Insurance Premium Tax (IPT): Your Complete Guide
• Types of business insurance you should know about