Summarise with AI
What a trial balance proves
It proves the mechanics of double entry held. Every debit had a matching credit, so the ledger is internally consistent. That is a real check, and it is the reason a trial balance is run before any report is produced.
Assets and expenses normally carry debit balances. Liabilities, equity and revenue normally carry credit balances. An account sitting on the unexpected side is not automatically an error — a bank account can be overdrawn — but it is always worth a look.
What it does not prove
A balanced trial balance says nothing about whether the entries were correct. Three common problems balance perfectly:
- A transaction coded to the wrong account
- A transaction entered twice
- A transaction never entered at all
Catching those requires reconciling to something outside the ledger — a bank reconciliation, agreeing the GST control account to the last lodged BAS, and checking payroll liabilities against your payroll reports.
Finding the error when it will not balance
Two arithmetic tests find most single-entry errors in under a minute, before you start rechecking the whole ledger.
Divide the difference by nine. If it divides evenly, you almost certainly have a transposition — two digits swapped, such as 5,400 entered as 4,500. That difference of 900 divides by nine.
Halve the difference. If the result matches a transaction you can see, that entry has been posted on the wrong side. Debiting what should have been credited moves the balance by exactly twice the amount.
When to run one
At the end of each month before you report anything, before preparing a BAS, and at year end before the file goes to your accountant. It is also the document that defines what was true on the date a client file changes hands.
Monthly is the useful cadence. An error found in July takes minutes; the same error found the following June takes hours, because eleven months of transactions have been built on top of it.
Key takeaways
- A trial balance lists every account balance and proves debits equal credits
- Balancing proves the arithmetic, not the accuracy of the coding
- A difference divisible by nine usually means a transposition
- A difference equal to twice a visible transaction means it is on the wrong side
- Run one monthly, before every BAS, and at handover or year end
Download a free trial balance template with the out-by cell and transposition hint built in, or use the general ledger template, which produces one automatically.
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