What is a trial balance?

A trial balance is a list of every account in your books with its balance, split into two columns: debits and credits. If your bookkeeping is arithmetically sound, the two columns add up to the same total. That's the whole idea — you “try” the balance, and either it balances or something is wrong.

It sounds like accountant furniture, but it's the first report a bank, an accountant or an auditor asks for, because it's the one page that shows the whole business at once.

How a trial balance works

Double-entry bookkeeping records every transaction twice: once as a debit and once as a credit. Send a customer an invoice for R5,000 and your books debit Accounts receivable (they owe you) and credit Sales (you earned it). Pay R1,200 rent and your books credit Bank (money left) and debit Rent expense (that's where it went). Because every entry has two equal sides, the sum of all debits must equal the sum of all credits — always.

The trial balance simply totals each account and lines them up. A tiny business might look like this:

• •Bank — debit R14,300
• •Accounts receivable — debit R5,000
• •Equipment — debit R9,000
• •Owner's capital — credit R20,000
• •Sales — credit R12,500
• •Rent expense — debit R3,600
• •Telephone expense — debit R600
• •Totals: debits R32,500 = credits R32,500 ✓

Debit balances are usually assets and expenses (what you own, what you spent). Credit balances are usually liabilities, capital and income (what you owe, what was put in, what you earned). An account sitting on the wrong side — a bank account with a credit balance, say — is itself information: you're overdrawn.

What a trial balance catches — and what it doesn't

If the columns don't agree, something is mechanically wrong: an entry posted on one side only, a transposed figure (R1,530 captured as R1,350 throws it out by exactly R180 — divisible by 9, an old bookkeeper's tell), or an account left out of the list.

But a balanced trial balance is not a correct one. Post a R2,000 fuel slip to Entertainment instead of Motor expenses and the books still balance. Leave an invoice out entirely and they still balance. Duplicate a transaction and they still balance. Balance proves the arithmetic, not the truth — which is why the review step matters more than the report.

Why anyone asks for it

The trial balance is the bridge between your day-to-day records and your financial statements. The income statement is built from its income and expense lines; the balance sheet from its asset, liability and capital lines. Your accountant starts the year-end from it, and SARS's ITR14 for a company is, underneath the form, a rearranged trial balance. If yours ties out and each balance has records behind it, year-end is cheap. If not, you pay a professional hourly to reconstruct your year.

Where the trial balance lives in Ledgr

Every invoice, payment and expense you capture in Ledgr lands in a double-entry journal, so the trial balance isn't a report you compile — it's a page that is always true of your books, with the working shown behind every line. And because Ledgr records what was reviewed, a trial balance you've signed off goes visibly stale the moment a new transaction changes it: you always know whether you're looking at figures someone has actually checked, or figures that have moved since.

If you're deciding between trading as yourself or through a company, the trial balance looks the same either way — what changes is whose books they are. See sole proprietor vs (Pty) Ltd.