What is Trial Balance?
Nexa Consultancy | Startup & Finance Glossary
A Trial Balance is an internal accounting report that lists all the accounts in a company's general ledger and their respective debit or credit balances. The primary purpose of a trial balance is to verify the mathematical equality of debits and credits after posting to the ledger. If the total debits do not equal the total credits, it indicates an error in the bookkeeping process.
For Startups: Preparing a trial balance is a key step in the month-end closing process. It is the step taken just before preparing the main financial statements (Income Statement and Balance Sheet). It ensures the integrity of the data before it is used for reporting and analysis.
Example: At the end of the month, an accountant generates a trial balance. The total of all debit balances is ₹1.5 Crore, and the total of all credit balances is also ₹1.5 Crore, confirming the books are in balance.