Trial Balance

A trial balance is a summary of all ledger account balances used to check the accuracy of bookkeeping.

Explanation:
It lists all debits and credits from the ledger to ensure they are equal. A balanced trial balance means the books are arithmetically correct, though not necessarily free from all errors.

Example:
If total debits are $50,000 and total credits are $50,000, the trial balance is balanced.

Importance:
The trial balance is a key step in preparing financial statements and detecting errors in recording.

Common Confusion:
A balanced trial balance doesn’t guarantee the absence of mistakes like omission or incorrect classification.