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TRIAL BALANCE What is it? The Trial Balance lists the debit and credit balances of all the ledger accounts at one point in time. The report is used to confirm that the total of the debits equals the total of the credits. If an accounting software package is used, the computer will print this report. The software program will balance all the ledger accounts and then show them with either a debit or credit balance. If you have a manual system, you need to work out the balance of each account and then manually write out a Trial Balance. Note: if your organisation is small and has a manual bookkeeping system, you may only use a Cash Book and not have ledger accounts or prepare a Trial Balance. Definitions A transaction is an exchange, usually involving money, between the organisation and another organisation or person. The Cash Book is often used for all transactions by very small organisations. The book is used to record all monies received and all payments made by the organisation. It often uses columns to identify types of receipts and payments and usually keeps a running total of the bank balance in the right hand column of the book. Example of a Trial Balance Organisation Name Trial Balance as at 30 June 2005 Account Names Cash at Bank Debit Credit 1,000 Grants (State) Operating – recurrent Wages Motor Vehicle 5,000 3,000 20,000 Accounts payable 2,000 Retained Surplus 17,000 $24,000 $24,000 Governance and Accountability – Financial Management - Trial Balance Topic Guide Page 1 of 2 Checking for errors If the total of the debits does not equal the total of the credits, you will need to retrace and check the entries. Purpose of Trial Balance Generally, the Trial Balance is used by the bookkeeper as a tool for checking the recording in the ledger accounts. It is usually done before preparing the financial reports. It is not part of the financial reports usually presented to management. What a manager/committee member needs to know about a Trial Balance The committee must check that the Trial Balance balances, i.e. that the debits equal the credits. The Trial Balance is a summary of the balances of all ledger accounts and can be used to check the balances of individual ledger accounts. However, this information is included in the financial statements in a format much more relevant to managers. Where the Trial Balance fits in Transactions are posted to the General Ledger. A Trial Balance is prepared by the Bookkeeper and used to check the accuracy of the General Ledger before preparing financial statements. Financial Statements are prepared. Related documents Bookkeeping and Chart of Accounts Topic Guide Governance and Accountability – Financial Management - Trial Balance Topic Guide Page 2 of 2