How to prepare a trial balance — and find the difference when it won't agree

A trial balance is a list of every account in the general ledger with its closing balance, set out in two columns — debits and credits — at a particular date. If the books have been kept with equal debits and credits, the two column totals agree.

It's the checkpoint between bookkeeping and reporting. Accountants prepare one before making adjustments, again after them, and once more after closing the books for the year. Auditors ask for one on day one. Employers set trial-balance tasks in practical interview tests. It's worth being fluent.

The three trial balances in the cycle

• Unadjusted trial balance — after all the period's transactions are posted, before period-end adjustments. It's the starting point for the adjustments.
• Adjusted trial balance — after accruals, deferrals, depreciation and other adjustments. The financial statements are prepared from it.
• Post-closing trial balance — after revenue, expense and drawings or dividend accounts have been closed to equity at the year-end. Only assets, liabilities and equity remain, ready for the new year.

How to prepare one

1. Post everything. Make sure every journal for the period has been posted to the ledger, including the last day's sales and purchases and any recurring journals.
2. Balance each ledger account. Total the debits and the credits in each account; the difference is its balance, on the side of the larger total.
3. List every account in chart-of-accounts order — assets, liabilities, equity, revenue, expenses — with the balance in the debit or credit column. Include accounts with nil balances if your system shows them; it helps spot missing postings.
4. Check each balance is on its normal side. Assets, expenses and drawings normally have debit balances; liabilities, equity and revenue normally have credit balances. A credit balance on Cash means an overdraft — or an error. Contra accounts such as accumulated depreciation are the expected exceptions.
5. Total both columns and compare.

A worked example: Halloway Print Studio

Halloway Print Studio's ledger balances at 31 March produce this unadjusted trial balance:

Debits: 8,450 + 3,200 + 1,150 + 18,000 + 1,500 + 5,400 + 2,700 + 640 = 41,040. Credits: 3,600 + 2,340 + 9,000 + 12,000 + 14,100 = 41,040. The totals agree.

Note that accumulated depreciation is a credit balance even though it sits among the assets — it's a contra-asset that reduces equipment to its carrying amount of 14,400.

What a balanced trial balance proves — and what it doesn't

A balanced trial balance proves one thing: that total debits posted equal total credits posted. It does not prove the books are right. These errors leave it perfectly balanced:

That's why accountants also reconcile the bank, receivables and payables to supporting records, review accounts for unusual balances, and compare the figures with the prior period and budget. The trial balance is a necessary check, not a sufficient one.

When it doesn't balance: finding the difference

Start by calculating the difference and looking at its size. These tests resolve most differences quickly.

1. Re-add both columns. Casting errors are common in manual and spreadsheet trial balances.
2. Look for a single item equal to the difference. An account left off the list, or one side of a journal never posted, leaves a difference equal to that amount.
3. Halve the difference. If an item has been put in the wrong column, the difference is twice its amount. Search for a balance equal to half the difference.
4. Divide by 9. If the difference divides exactly by 9, look for a transposition (digits swapped, such as 640 keyed as 460) or a slide (decimal point moved, such as 1,250 keyed as 125).
5. Check balances on the wrong side. Any account whose balance isn't on its normal side deserves a second look.
6. Compare with the last balanced trial balance. Accounts that moved unexpectedly point to the period's problem postings.
7. Check the journals. If the ledger is right but a journal was unbalanced, the difference sits in that journal. Accounting systems usually refuse to post unbalanced journals, which is why differences now come more often from spreadsheet workings and imports.

Two worked differences

Draft A shows debits of 40,860 and credits of 41,040, a difference of 180. Nothing in the list equals 180, and half (90) isn't a balance either. But 180 ÷ 9 = 20, which points to a transposition. The quotient also hints at where: 20 = 2 × 10, so two adjacent digits differing by 2 in the tens and hundreds places. Utilities expense appears as 460 instead of 640 (640 − 460 = 180). Correcting it gives debits of 41,040.

Draft B shows debits of 39,540 and credits of 42,540, a difference of 3,000. Half the difference is 1,500 — the balance on Owner's drawings, which has been listed as a credit. Moving it to the debit column reduces credits by 1,500 and increases debits by 1,500, and both totals become 41,040.

To practise tracing a difference through the ledger, try the error investigation simulator.

Correcting what you find

If the error is only in how the trial balance was listed (as in both drafts above), fix the list. If a ledger posting is wrong, correct it with a journal entry — never by editing posted entries. Correcting journals should be dated, described and supported so the audit trail shows what changed and why; the correcting errors lesson has graded practice. Avoid a "suspense account" plug except as a short-lived holding entry that's cleared before the statements are finalised.

From trial balance to statements

Once the adjusted trial balance agrees, the statements follow: revenue and expense accounts produce the income statement; profit and drawings or dividends update equity; assets, liabilities and closing equity form the statement of financial position. The financial statements guide shows the full flow.

Common mistakes

• Listing an account in the wrong column because its type was misread — especially contra accounts, drawings and overdrafts.
• Leaving out accounts with small balances or nil-balance accounts that should have activity.
• Treating a balanced trial balance as proof that the books are correct.
• Forcing agreement with an unexplained plug.
• Preparing the statements from the unadjusted trial balance.

Frequently asked questions

Is a trial balance a financial statement?

No. It's an internal working document. The financial statements are prepared from it.

Why does accumulated depreciation appear as a credit?

It's a contra-asset: it reduces the related asset, so it carries the opposite (credit) balance.

Does accounting software make the trial balance unnecessary?

Software won't post an unbalanced journal, so the totals almost always agree. The trial balance is still the starting point for reviewing balances, making adjustments and preparing statements — and for spotting the errors above that balance anyway.

Practise it

Work through the free lessons on posting and T-accounts and the unadjusted trial balance, then the adjusted trial balance. The Trial Balance Doesn't Agree case gives you a real ledger with real differences to find. The T-account posting simulator is good for warming up, and the Month-end accountant pathway puts it all in order.