Table of contents
Table of contents
A trial balance report is an important part of finishing everything neatly in your records at the end of an accounting period, ready to start the next financial period. A bit like using your best handwriting for the first few pages of a new notebook. In this short guide we’ll explain what this type of report means for your business, what they look like, and how to create one.
Heard the phrase balancing the books? Your trial balance is key to this. In accounting, a trial balance report is basically a list of all the balances from each section of your business’s financial records – known as the general ledger accounts.
The balances for each account are worked out using all the transactions which happened over a set period of time, arranged into two columns:
When the totals of the two columns are equal, your books are balanced. You won’t need to send your report to HMRC, so you won’t get extra marks or a gold star – it’s just useful within the business. Trial balances are part of a larger group of financial reports that are useful to look at.
It all depends on how you record your finances. Double-entry bookkeeping is a requirement for limited companies, but it’s used by most businesses anyway. Each transaction shows some sort of exchange has taken place, so the transaction is recorded twice in your bookkeeping to show both sides. Your trial balance will show
When you make a sale, something leaves your business so your records need to show this. In return, this is balanced by a resource coming into the business, such as the money your customer pays.
The trial balance report is an easy way to make sure every transaction includes a debit and corresponding credit. If the corresponding entry is missing, you know something is wrong and that you need to take action. For example, your customer received their goods or services, but they haven’t paid you yet and they’re very naughty.
Many businesses find it useful to run a trial balance report at the end of a financial period (such as a reporting month) to make sure everything balances. It minimises the risk of dragging old problems onwards into the future with you.
Good bookkeeping software (yes, like Pandle, it’s our actual job to point this out) will automatically update your trial balance report each time you update anything in your bookkeeping. If something doesn’t match, it will show you where the problems are, so you know where to start.
It’s a bit easier to decipher what your trial balance actually means when you’re clear about what goes into it:
Your trial balance will include a list of totals from all your general ledger accounts, along with the category description of the account, and its final credit or debit balance. Your report should also show the time period it relates to, so that you know what transactions are included in the balance.
The general ledger shows all of the transactions which happen in your business, and organises them according to the account they relate to. The trial balance will only show the account totals, rather than each individual transaction.
Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.
A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.
Create your account today, and decide what to do with all the extra time you get back. We hear Pilates is popular.
Live chat support
No card details required
Making Tax Digital compliant
