Financial Accounting
Trial Balance
5 question(s)
What is a trial balance?
Beginner
A list of all ledger account balances at a date, with debits in one column and credits in another, used to check that total debits equal total credits.
Total Debits 250,000 = Total Credits 250,000
Real-world example
Prepared before drafting the financial statements to catch obvious errors.
Does a balanced trial balance mean there are no errors?
Intermediate
No. Errors of omission, commission, principle, original entry, complete reversal and compensating errors don't unbalance it.
Omitting a transaction entirely still leaves Dr = Cr
Real-world example
Auditors don't rely on a balanced TB alone; they test transactions.
What is a suspense account?
Intermediate
A temporary account used to make a trial balance balance while an error or unknown item is investigated, then cleared once resolved.
Difference of 90 -> Dr/Cr Suspense 90 until found
Real-world example
Used when the books must be finalised before an error is located.
How do you locate a difference in a trial balance?
Advanced
Check the addition, look for an amount equal to the difference (single omission), halve the difference (posted to wrong side), and divide by 9 (transposition of digits).
Difference 540 -> 540/9 = 60 -> suspect a transposition (e.g. 65 <-> 56)
Real-world example
A quick divide-by-9 check often finds a swapped-digit posting fast.
What are the two purposes of a trial balance?
Beginner
To check the arithmetic accuracy of the double-entry (Dr = Cr) and to provide a convenient summary from which to prepare the financial statements.
TB balances -> start preparing the Income Statement & Balance Sheet
Real-world example
Month-end close begins with extracting a trial balance.