🧾financial accounting i review

key term - Trial balance

Definition

A trial balance is a financial statement that lists all the general ledger accounts and their respective debit or credit balances at a specific point in time. It helps ensure that total debits equal total credits, verifying the arithmetic accuracy of the ledger.

5 Must Know Facts For Your Next Test

  1. The trial balance is prepared before adjusting entries are made.
  2. It consists of three columns: account names, debit balances, and credit balances.
  3. If debits do not equal credits, it indicates an error in the ledger that must be corrected.
  4. The trial balance does not detect every type of error, such as omitted transactions or double posting.
  5. Preparing a trial balance is an essential step before creating financial statements.

Review Questions