What is Trial Balance?
A trial balance is an accounting report that lists every general ledger account along with its debit or credit balance at a specific point in time. Its main purpose is to verify the mathematical accuracy of the ledger: total debits must equal total credits. It is prepared before and after adjusting entries.
How It Works
- Extract the closing balance of every active GL account.
- List asset and expense balances on the debit side; liability, equity, and revenue on the credit side.
- Sum both columns; they must be equal.
- If unequal, investigate posting errors, transposition errors, and missing entries.
- Use the adjusted trial balance to prepare the financial statements.
Saudi Context
Saudi accounting software such as Qoyod generates trial balances on demand, including unadjusted, adjusted, and post-closing versions. ZATCA and external auditors regularly inspect the trial balance during VAT, income tax, and zakat reviews to verify the basis for the financial statements submitted with returns.
Example
A company’s adjusted trial balance shows debits totaling SAR 7,420,000 (cash, receivables, inventory, expenses) and credits totaling SAR 7,420,000 (payables, equity, revenue). Equal totals confirm the ledger balances; management then drafts the income statement and balance sheet from these figures.