The Trial Balance is an internal accounting report that serves a very specific and critical purpose: to verify that the total of all debits equals the total of all credits in the General Ledger. It is a fundamental check that ensures your books are mathematically in balance before the main financial statements are prepared.
While it's not one of the three core financial statements you might share with investors (like the Income Statement or Balance Sheet), the Trial Balance is an essential tool for bookkeepers and accountants to ensure accuracy and integrity in the financial records.
To view this report in Dappr, navigate to Accounting from the main menu, select Reports and statements, and then click on Trial balance in the sub-menu.
What is a Trial Balance?
At its core, the Trial Balance is a simple list of every account in your Chart of Accounts and its final balance at the end of a specific period. The report has two main columns: one for debit balances and one for credit balances. The "trial" is to see if the total of the debit column equals the total of the credit column.
This is a direct application of the double-entry bookkeeping system, where every transaction has an equal and opposite effect. If every transaction has been recorded correctly, the sum of all debits must equal the sum of all credits across the entire accounting system.
How to read the Trial Balance
The Trial Balance report lists all your accounts—assets, liabilities, equity, revenue, and expenses. Each account will have its balance appear in one of two columns:
Debit Column: An account will have a balance in this column if it has a "normal debit balance." This includes all your Asset and Expense accounts.
Credit Column: An account will have a balance in this column if it has a "normal credit balance." This includes all your Liability, Equity, and Revenue accounts.
The most important part of the report is the total at the bottom of each column. These two totals must be identical. If they are, it confirms your ledger is "in balance."
Because Dappr's accounting system automatically creates balanced journal entries for every transaction you record, your Trial Balance will always be in balance. This report serves as a confirmation of that system integrity.
Why is the Trial Balance important?
In traditional manual bookkeeping, the Trial Balance is a crucial step in the accounting cycle for several reasons:
Error Detection: Its primary function is to detect mathematical errors in the General Ledger. If the debit and credit totals do not match, it immediately signals that an error has been made somewhere in the recording of journal entries. It won't tell you what the error is (e.g., a transaction posted to the wrong account), but it will tell you that an error exists.
Foundation for Financial Statements: Once the Trial Balance is confirmed to be in balance, accountants use the numbers from it as the source data to prepare the Income Statement and Balance Sheet. The expense and revenue account balances are used for the Income Statement, while the asset, liability, and equity account balances are used for the Balance Sheet.
A Tool for Auditors: During a financial audit, auditors will use the Trial Balance as a starting point to trace numbers back to the General Ledger and ensure the financial statements are accurately derived from the company's records.
For Dappr users, the Trial Balance serves as a powerful verification tool. It gives you and your accountant the confidence that the underlying data used to generate your financial reports is mathematically sound and adheres to the fundamental principles of double-entry accounting.