How to prepare a trial balance

Why it matters

The trial balance is the base of the financial statements. It proves that your double entry adds up.

It also shows unusual balances, such as a negative stock account or a large suspense balance.

The steps

1. Set the date. Use the period end, such as 31 October or 30 June.
2. Close the period. Post all entries, accruals and depreciation for the period first.
3. Run the report. Run the trial balance from your accounting system for that date.
4. Sort by type. Assets, liabilities, equity, income and expenses. Check each account has the normal balance.
5. Add the columns. Add all debit balances and all credit balances. The totals must agree.
6. Find any difference. If they do not agree, look for a one-sided entry, a transposed number or a missing posting.
7. Review unusual balances. Check suspense, clearing and ask-my-accountant accounts. They should be zero or explained.
8. Save a copy. Save it as PDF with the date. Use it to build the profit and loss and the balance sheet.

Worked example

Example Distribution Pty Ltd has these balances at 31 October.

Account	Debit	Credit
Bank	A$51,400
Accounts receivable	A$22,000
Stock	A$80,000
Accounts payable		A$10,260
GST liability		A$24,090
Owner equity		A$100,000
Sales		A$60,000
Cost of sales	A$30,000
Wages	A$12,000
Rent	A$2,000
Insurance	A$1,000
Other expenses	A$5,950
Total	A$204,350	A$194,350

The totals differ by A$10,000, so the trial balance does not balance. The team checks postings and finds a A$10,000 owner contribution recorded on one side only. After the fix both columns total A$204,350.

Common mistakes

• Running it before the period is complete.
• Forcing a balance with a suspense entry.
• Ignoring accounts with the wrong sign.
• Not saving a dated copy.

Next step

Use the Trial balance generator first. Then see faster month-end close with Pulsify.