what is trial balance?

Answer 1

After all transactions have been posted from the journal to the ledger, it is a good practice to prepare a trial balance. A trial balance is simply a listing of the ledger accounts along with their respective debit or credit balances. The trial balance is not a formal financial statement, but rather a self-check to determine that debits equal credits. (Click on the 1st link for an example)

The trial balance is an internal document—it stays in the accounting department. It is a listing of all of the accounts in the general ledger (balance sheet accounts and income statement accounts) and their respective balances as of a specified point in time, such as June 30, 2006. The purpose of the trial balance is to document that the total amount of account balances with debit balances is equal to the total of amount of account balances with credit balances. (2nd link)

To prepare a trial balance, you or the accounting software will simply list the titles of all of the accounts in the general ledger that have balances. To the right of the account titles you will have two columns for entering each account’s balance. One column is headed “Debit” and the other column is headed “Credit.” You then list each account’s balance in the appropriate column. After all of the account balances are entered, each column is summed. The total of the debit column should be equal to the total of the credit column. (3rd link)

Answer 2

Trial balance is an accounting term. It's when a company takes all of their accounts and lists them in 2 columns, debits and credits. They then add all the debits and credits together, and debits must equal credits. If not, they screwed up somewhere.

So it's a quick way to check to make sure they didn't screw up their books.

Per investopedia:

"A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns. A company prepares a trial balance periodically, usually at the end of every reporting period. The general purpose of producing a trial balance is to ensure the entries in a company's bookkeeping system are mathematically correct.

Investopedia Says... Preparing a trial balance for a company serves to detect any mathematical errors that have occurred in the double-entry accounting system. Provided the total debts equal the total credits, the trial balance is considered to be balanced, and there should be no mathematical errors in the ledgers.

However, this does not mean there are no errors in a company's accounting system. For example, transactions classified improperly or those simply missing from the system could still be material accounting errors that would not be detected by the trial balance procedure."