A trial balance is one of the simplest reports in bookkeeping, and one of the most useful. It lists every account in your books with its balance, debits in one column and credits in the other. If the two columns add up to the same total, your double-entry records are consistent. If they don't, something has gone wrong, and you know about it before it reaches your accountant or your tax return.
What a trial balance looks like
Here's a small example after a business owner has put in capital, invoiced a customer, been paid and paid a bill:
| Account | Debit | Credit |
|---|---|---|
| Bank account | £5,640.00 | |
| Accounts receivable | £1,020.00 | |
| Rent expense | £800.00 | |
| VAT payable | £410.00 | |
| Owner's capital | £5,000.00 | |
| Sales | £2,050.00 | |
| Totals | £7,460.00 | £7,460.00 |
The totals match, so the books balance.
Why accounts sit on the debit or credit side
Each account's normal balance depends on its type:
- Debit balances: assets (bank, receivables, equipment) and expenses (rent, software, wages)
- Credit balances: liabilities (loans, payables, VAT owed), equity (capital, retained earnings) and income (sales)
If an account appears on its unusual side, for example a bank account with a credit balance, it's worth a look. A credit balance in the bank usually means an overdraft, or an entry posted the wrong way round. If debits and credits are new to you, read double-entry bookkeeping explained first.
How to read a trial balance
- Check the totals match. This is the headline test.
- Scan for unusual balances. Negative or wrong-side balances often point to mistakes.
- Sense-check the big numbers. Does the bank balance agree with your bank statement? Do receivables match what customers actually owe?
- Look for accounts that shouldn't have balances, such as a suspense account or an old clearing account.
What a trial balance can't catch
A balanced trial balance proves your debits equal your credits. It doesn't prove every entry is right. These errors leave it balanced:
- Errors of omission: a transaction never recorded at all.
- Errors of commission: the right type of account but the wrong one, such as rent posted to repairs.
- Errors of principle: the wrong type of account, such as a laptop recorded as an expense instead of an asset.
- Compensating errors: two mistakes that cancel each other out.
- Duplicates: the same entry recorded twice, on both sides.
That's why reviewing account balances matters, not just the totals.
When it doesn't balance: how to find the error
If you keep books by hand or in a spreadsheet, these checks find most errors:
- Work out the difference between the two totals.
- Look for that exact amount. A single missing side of an entry often equals the difference.
- Halve the difference. If an amount was posted to the wrong side, the error is twice the amount, so look for half the difference.
- Divide the difference by 9. If it divides evenly, suspect a transposition, such as 54 typed as 45.
- Re-add the columns. Simple addition errors are common in manual books.
- Check balances were carried over correctly from the previous period.
From trial balance to financial statements
The trial balance is the raw material for your main reports:
- Income and expense accounts become your profit and loss statement.
- Assets, liabilities and equity become your balance sheet.
Accountants often prepare an adjusted trial balance at year end, after adding entries for depreciation, accruals and prepayments.
Software that can't go out of balance
The most reliable way to keep a trial balance balanced is software that refuses unbalanced entries. Zelvorm Books enforces double entry in its database, so every entry balances or it isn't saved, and the trial balance is always up to date. That leaves you free to focus on the part software can't do: checking each account makes sense.
Worked example: finding a £90 error
Say your trial balance shows debits of £12,480 and credits of £12,390, a difference of £90.
- Look for a £90 entry. You search your journals and find nothing for exactly £90.
- Halve it: £45. If a £45 amount was posted on the wrong side, the difference would be £90. You find a £45 bank charge recorded as a credit to the expense account instead of a debit. That's it.
- Fix it properly. Rather than editing the old entry, post a reversal of the wrong entry and then the correct one, so the history shows what happened.
If halving hadn't worked, the next check is dividing by 9: £90 divides evenly, which suggests two digits were swapped, such as £120 typed as £210, or £340 typed as £430. Swapped tens and hundreds digits that differ by one always leave a difference of exactly £90.
The adjusted trial balance at year end
At year end, your accountant usually adds adjusting entries so the accounts reflect the whole year accurately:
| Adjustment | What it does | Example |
|---|---|---|
| Depreciation | Spreads an asset's cost over its useful life | A £1,200 laptop over three years: £400 a year |
| Accruals | Records costs incurred but not yet billed | December's electricity, billed in January |
| Prepayments | Moves costs paid in advance into the right year | A yearly insurance premium paid in October |
| Deferred income | Moves income received in advance into the right year | A customer pays in December for January's work |
| Bad debts | Writes off invoices that won't be paid | A customer that went out of business |
The trial balance after these entries is the adjusted trial balance, and it's what the year-end accounts are built from.
A monthly close checklist
A short monthly routine keeps your trial balance trustworthy:
- Record all invoices, bills, payments and expenses for the month.
- Compare your bank account balance with your bank statement.
- Run the trial balance and confirm debits equal credits.
- Scan for unusual balances: wrong-side balances, unexpected accounts, suspense balances.
- Check receivables and payables against your aging reports.
- Review the profit and loss for anything surprising.
- Note any questions for your accountant while they're fresh.
Trial balance vs balance sheet
They're easy to confuse. The trial balance lists every account, including income and expenses, to prove the books are consistent. The balance sheet shows only assets, liabilities and equity, organised to show your financial position. The trial balance is a check; the balance sheet is a statement. See balance sheet basics.
Signs your trial balance needs a closer look
- A suspense or "uncategorised" account with a balance
- Bank balance that doesn't match the statement
- Receivables that keep growing month after month
- Expense accounts with credit balances
- Large round-number entries you don't recognise
Any one of these is worth fifteen minutes before it becomes a year-end problem.
The short version
A trial balance lists every account's balance and proves your total debits equal your total credits. Run one at least monthly, look beyond the totals for odd balances, and remember that balancing doesn't guarantee every entry is in the right account.
