What a trial balance is for
A trial balance is an internal working document, not a financial statement. It does two jobs. First, it checks the arithmetic of the bookkeeping: if debits do not equal credits, something was posted wrongly. Second, it is the starting point for the income statement and the balance sheet, because it lists every account balance in one place.
Accountants usually prepare it at the end of each month or quarter: an unadjusted trial balance first, then an adjusted one after entries such as depreciation and accruals, and a post-closing one after revenue and expense accounts have been closed to retained earnings.
Step 1: list every account with its normal balance
Each type of account normally has its balance on one side:
| Account type | Normal balance | Increases with |
|---|---|---|
| Assets | Debit | Debit |
| Expenses | Debit | Debit |
| Liabilities | Credit | Credit |
| Equity | Credit | Credit |
| Revenue | Credit | Credit |
Contra accounts are the exception. Accumulated depreciation belongs with the assets but carries a credit balance, because it reduces the equipment to its carrying amount.
Step 2: split the balances into debit and credit columns
Many accounting systems export balances as one signed number: positive for debit balances, negative for credit balances. In Excel you do not need to sort them by hand. Two formulas do it:
- Debit column:
=MAX(B2,0)shows the balance if it is positive, otherwise 0. - Credit column:
=MAX(-B2,0)shows the balance as a positive number if it is negative, otherwise 0.
Fill both down and every account lands in the right column automatically.
Worked example: trial balance at 31 March 2026
Column B is the signed balance from the ledger. Columns C and D are formulas, so you never decide by hand which column a balance goes in.
| A | B | C | D | |
|---|---|---|---|---|
| 1 | Account | Balance (+ debit, − credit) | Debit | Credit |
| 2 | 1000 Cash | 18,400 | 18,400 | 0 |
| 3 | 1100 Accounts receivable | 6,200 | 6,200 | 0 |
| 4 | 1200 Inventory | 9,800 | 9,800 | 0 |
| 5 | 1500 Equipment | 24,000 | 24,000 | 0 |
| 6 | 1510 Accumulated depreciation | -1,200 | 0 | 1,200 |
| 7 | 2000 Accounts payable | -7,300 | 0 | 7,300 |
| 8 | 2500 Bank loan | -15,000 | 0 | 15,000 |
| 9 | 3000 Share capital | -27,000 | 0 | 27,000 |
| 10 | 4000 Sales revenue | -48,500 | 0 | 48,500 |
| 11 | 5000 Cost of goods sold | 26,100 | 26,100 | 0 |
| 12 | 6000 Rent expense | 4,500 | 4,500 | 0 |
| 13 | 6100 Wages expense | 7,200 | 7,200 | 0 |
| 14 | 6200 Utilities expense | 1,300 | 1,300 | 0 |
| 15 | 6500 Depreciation expense | 1,200 | 1,200 | 0 |
| 16 | 7000 Interest expense | 300 | 300 | 0 |
| 17 | Total | 0 | 99,000 | 99,000 |
| 18 | Check | Balanced |
- C2
=MAX(B2,0)Debit balances - D2
=MAX(-B2,0)Credit balances as positive numbers - B17
=SUM(B2:B16)Signed balances must add up to 0 - B18
=IF(ROUND(C17-D17,2)=0,"Balanced","Out by "&ROUND(C17-D17,2))Readable check
Step 3: total both columns and check
Total each column with SUM. In the example, debits and credits are both $99,000, and the signed balances add up to exactly 0, which is the same check in one number. An IF formula turns that into a message, so a broken trial balance is impossible to overlook. ROUND stops tiny floating-point differences from showing up as errors.
When the trial balance does not balance
Work from the size of the difference. Three tricks find most errors quickly:
- Search for the difference itself. A one-sided entry or a missing account leaves a gap of exactly that amount.
- Halve it. If a $1,300 debit was posted as a credit, the columns differ by $2,600. Look for an entry of half the difference.
- Divide by 9. If wages of $7,200 were typed as $2,700, the difference is $4,500, and 4,500 ÷ 9 = 500 with no remainder. A difference that divides evenly by 9 often points to a transposition or a slipped decimal point.
What a balanced trial balance does not prove
Equal totals only prove that the debits and credits were equal. These errors still balance: an entry posted to the wrong account (rent booked as wages), a transaction left out completely, the same transaction posted twice, debit and credit reversed, and two errors that cancel each other. That is why accountants also reconcile the bank account, receivables and payables with outside evidence.
From the trial balance to the financial statements
The revenue and expense accounts give the income statement: sales of $48,500 minus expenses of $40,600 leaves a net income of $7,900. The rest gives the balance sheet: assets of $57,200 (after deducting accumulated depreciation) equal liabilities of $22,300 plus equity of $34,900 (share capital $27,000 + the quarter's profit $7,900). If that last equation holds, the trial balance and the statements tie together.
Common mistakes
- Putting a contra account on its "family" side. Accumulated depreciation is listed with the assets but has a credit balance.
- Listing totals of postings instead of balances for some accounts and balances for others. Pick one view for the whole trial balance.
- Forgetting accounts with a small balance, such as interest or bank charges. Every account with a balance belongs in the list.
- Treating "balanced" as "correct". Postings to the wrong account balance perfectly and still distort the statements.
- Typing the totals. Use SUM, and let a check formula flag differences, so a later correction cannot leave stale totals behind.
Frequently asked questions
What is the difference between a trial balance and a balance sheet?
A trial balance lists every account, including revenue and expenses, to check that debits equal credits. A balance sheet is a financial statement that shows only assets, liabilities and equity at one date.
What is an adjusted trial balance?
The trial balance after adjusting entries such as depreciation, accrued expenses, prepaid expenses and unearned revenue have been posted. The financial statements are prepared from it.
Why is my trial balance out by an amount divisible by 9?
That pattern often comes from transposed digits, such as 72 typed as 27, or a misplaced decimal point. Look for amounts in which two digits could have been swapped.
Does a balanced trial balance mean there are no errors?
No. Errors of omission, postings to the wrong account, reversed entries and compensating errors all leave the debit and credit totals equal.