A Trial Balance is an internal financial statement that contains the adjusted closing balances of all general ledger accounts as on a specific date. These ledger accounts may include both revenue and capital accounts maintained in the books of an entity. In banking and accounting, the Trial Balance provides a consolidated list of balances appearing in the general ledger at a particular point of time.
The Trial Balance contains the name of each nominal ledger account and the balance of that account. The accounts are generally presented in an appropriate order, including the order of liquidity. Every nominal ledger account normally has either a debit balance or a credit balance.
Accounts having debit balances are shown in the debit column of the Trial Balance, while accounts having credit balances are shown in the credit column. Under the double-entry bookkeeping system, the total of debit balances should be equal to the total of credit balances.
The Trial Balance forms an important basis for the preparation of financial reports. The ledger accounts and balances appearing in the Trial Balance can be used for preparing the Trading Account, Profit and Loss Statement, Balance Sheet, and other financial reports.
Thus, a Trial Balance can be understood as a statement that brings together the closing balances of ledger accounts and presents them in debit and credit columns. It helps in checking the arithmetic accuracy of the double-entry bookkeeping system and provides the ledger information required for preparing financial statements.
The first published description of a function similar to a Trial Balance is found in Luca Pacioli’s 1494 work, Summa de arithmetica, particularly in the section titled Particularis de Computis et Scripturis. Although Luca Pacioli did not specifically use the term Trial Balance, he described a technique similar to a post-closing Trial Balance.