How to Prepare a Trial Balance

What Is a Trial Balance?

A trial balance is a report that lists every account in the general ledger and its balance at a specific point in time. Its purpose is simple: verify that total debits equal total credits.

If they don't match, there's an error somewhere in your journal entries. The trial balance is the checkpoint between posting entries and preparing financial statements.

When Do You Prepare a Trial Balance?

There are three types:

1. Unadjusted Trial Balance — Prepared after posting all journal entries for the period, but before adjusting entries. This is your starting point.

2. Adjusted Trial Balance — Prepared after all adjusting entries (prepaid expenses, accrued revenue, depreciation, etc.) are posted. This is what you use to prepare financial statements.

3. Post-Closing Trial Balance — Prepared after closing entries. Only permanent accounts (assets, liabilities, equity) remain. This confirms the books are ready for the next period.

How to Prepare a Trial Balance — Step by Step

Step 1: List every account from the general ledger.

Step 2: Record each account's balance in the appropriate column — debit or credit. - Assets and Expenses → Debit column - Liabilities, Equity, and Revenue → Credit column

Step 3: Total both columns.

Step 4: Compare. If they're equal, the trial balance is in balance. If not, find the error.

Worked Example

Here's an adjusted trial balance for Al-Noor Consulting as of December 31:

Debits equal credits. The trial balance is in balance.

Notice: Accumulated Depreciation is a contra-asset — it has a credit balance even though it's related to equipment (an asset). It reduces the book value of the asset.

What a Trial Balance Catches

• Entries posted with unequal debits and credits
• Entries posted to only one account (missing the other side)
• Math errors in account balances
• Transposition errors that cause imbalances

What a Trial Balance Doesn't Catch

A balanced trial balance doesn't mean the books are error-free. These mistakes won't show up:

• Wrong account used — debiting Equipment instead of Supplies (both are assets, both are debits)
• Entry completely omitted — if a transaction was never recorded, nothing is out of balance
• Entry recorded twice — both sides double, so it still balances
• Wrong amount on both sides — equal but incorrect amounts still balance

This is why a trial balance is a checkpoint, not a guarantee.

From Trial Balance to Financial Statements

Once your adjusted trial balance is confirmed, you extract:

• Revenue and Expense accounts → Income Statement
• Asset, Liability, and Equity accounts → Balance Sheet

The trial balance is the single source document for both statements. Getting it right means your financials will be right.

Want to practice preparing trial balances with real data? Accountery's worksheet exercises walk you through the entire process with instant validation on every cell.