Trial Balance

 

The trial balance is a worksheet listing the balance at a certain date, of each ledger account in two columns, namely debit and credit. Under the double-entry system, in any transaction the total of any debits must equal the total of any credits, so in a Trial Balance the total of the debit side should always be equal to the total of the credit side. It thus serves as a tool to detect errors, which can result in the totals not being equal. Often credits will be represented as a negative, in which case the total of the trial balance should be 0.

At the same time a balanced trial balance does not necessarily guarantee accuracy. The following are the main classes of error that are not detected by the trial balance:

	An error of original entry is when both sides of a transaction include the wrong amount. As the amounts will be same on both sides the totals will balance.
	An error of omission is when a transaction is completely omitted from the accounting records. As the debits and credits for the transaction would balance, omitting it would still leave the totals balanced.
	An error of reversal is when entries are made to the correct amount, but with debits instead of credits, and vice versa. Such an error will not affect the totals.
	An error of commission is when the entries are made at the correct amount, and the appropriate side (debit or credit), but one or more entries are made to the wrong account of the correct type. For example, if fuel costs are incorrectly debited to the postage account (both expense accounts). This will not affect the totals.
	An error of principle is when the entries are made to the correct amount, and the appropriate side (debit or credit), but the wrong type of account is used.[1] For example, if fuel costs (an expense account), are debited to stock (an asset account). This will not affect the totals.
	Compensating errors are multiple unrelated errors that would individually lead to an imbalance, but together cancel each other out.[1]
	A Transposition Error is a Computing error caused by switching the position of two adjacent digits. Since the resulting error is always divisible by 9, accountants use this fact to locate the wrongly entered number.

The trial balance is a useful tool, but every transaction must be carefully analyzed, journalized, and posted to ensure the reliability and usefulness of accounting records.