Trial balance practice: from T-accounts to a balanced list

A trial balance lists every account in the ledger with its balance, debits in one column and credits in the other. Learn how to find each balance, which column it belongs in, and what a matching total does and doesn't prove.

What a trial balance is for

After journal entries are posted, each account in the ledger has a set of debits and a set of credits. A trial balance pulls those accounts together on one page. For each account it shows a single number, the balance, in either the Debit column or the Credit column. Then both columns are totaled.

Because every journal entry has equal debits and credits, the ledger as a whole must balance too. If the two totals agree, the ledger is arithmetically in balance. If they don't, something went wrong between the journal and the trial balance: a posting was missed, an amount was copied wrongly, or a balance was put in the wrong column.

The trial balance is also the starting point for the next steps of the accounting cycle. Accountants use it to spot accounts that need adjusting entries and, later, to prepare the financial statements.

How to find an account's balance

Ledger accounts are often sketched as T-accounts: debits on the left, credits on the right. To find the balance:

1. Add up the debit side.
2. Add up the credit side.
3. Subtract the smaller total from the larger.
4. The balance sits on the side that was larger.

So the balance is total debits minus total credits. A positive result is a debit balance. A negative result is a credit balance of that size.

Which column does each balance go in?

Each account appears once, in one column only. Normally you can predict the column from the account type:

The arithmetic decides in the end: the balance goes on whichever side is larger in the T-account. But if your Cash ends up in the Credit column, stop and check your addition. It is far more likely to be a slip than an overdrawn bank account.

If the debit and credit rules behind this table are still new, see journal entry practice problems first.

Worked example: Juniper Landscaping in September

Juniper Landscaping posted five September entries to its ledger. The numbers in parentheses are entry numbers, so you can trace each amount back to its entry.

• Cash: debits (1) $20,000.00, (2) $6,750.00, (3) $1,160.00; credits (4) $431.39, (5) $729.62.
• Unearned Revenue: credit (2) $6,750.00.
• Owner's Capital: credit (1) $20,000.00.
• Service Revenue: credit (3) $1,160.00.
• Utilities Expense: debits (4) $431.39, (5) $729.62.

Reading the entries back: the owner invested $20,000.00 (entry 1). A customer paid $6,750.00 in advance for work not yet done, which is a liability (entry 2). The business earned $1,160.00 in cash (entry 3). Two utility bills were paid (entries 4 and 5).

Step 1: balance each T-account

Cash is the only account with entries on both sides.

• Debits: $20,000.00 + $6,750.00 + $1,160.00 = $27,910.00.
• Credits: $431.39 + $729.62 = $1,161.01.
• Balance: $27,910.00 − $1,161.01 = $26,748.99, a debit balance.

Utilities Expense has two debits: $431.39 + $729.62 = $1,161.01, a debit balance.

The other three accounts have a single credit each, so their balances are simply those amounts: Unearned Revenue $6,750.00, Owner's Capital $20,000.00 and Service Revenue $1,160.00, all credit balances.

Step 2: list the balances

Step 3: total and compare

Debits: $26,748.99 + $1,161.01 = $27,910.00. Credits: $6,750.00 + $20,000.00 + $1,160.00 = $27,910.00. The totals agree, so the ledger is in balance.

Accounts are listed in the usual order: assets, liabilities, equity, revenue, then expenses. That order isn't required for the totals to work, but it makes the trial balance easy to read and easy to turn into financial statements.

A second example: Copperleaf Studio in March

Longer ledgers work the same way; there are just more accounts with entries on both sides. Copperleaf Studio's March ledger has two such accounts.

Cash has debits of $20,000.00, $4,940.00 and $655.00, which total $25,595.00, and one credit of $1,050.00 for rent. The balance is $25,595.00 − $1,050.00 = $24,545.00, a debit.

Accounts Receivable has debits of $5,190.00 and $7,160.00 for two sales on account, which total $12,350.00. It has one credit of $4,940.00, when a customer paid. The balance is $12,350.00 − $4,940.00 = $7,410.00, a debit.

Notice that $4,940.00 appears twice in the ledger: as a debit to Cash and a credit to Accounts Receivable. That is one entry, a customer paying their bill, seen from both accounts. Tracing amounts by entry number like this is a quick way to confirm that each posting landed on both sides.

Service Revenue has three credits: $5,190.00 + $7,160.00 + $655.00 = $13,005.00. The remaining accounts have one posting each.

Both columns total $33,713.41, so the March ledger is in balance.

Common mistakes and how to avoid them

Both mistakes below are caught by all three exercises. Notice that each one still produces matching totals, which is why they are worth knowing.

Entering both sides instead of the balance

A trial balance shows each account's balance, not its total debits and total credits. If you list Cash as $27,910.00 in the Debit column and $1,161.01 in the Credit column, you have copied the T-account rather than balancing it.

Here is the trap: if you do this for every account, the totals still match, at $29,071.01 on each side instead of $27,910.00. The columns agree, but the trial balance is wrong. Enter the difference between the two sides, once, on the larger side.

Putting every balance in the opposite column

Some learners put Cash and Utilities Expense in the Credit column and the liabilities, capital and revenue in the Debit column. Again the totals still agree, at $27,910.00 each, because every amount simply moved across. But each account is now shown with the wrong kind of balance.

Use the normal-balance table as a check. Assets and expenses normally have debit balances; liabilities, equity and revenue normally have credit balances. If an account is on the unusual side, recheck it before moving on.

What a balanced trial balance doesn't prove

Matching totals are a good sign, but they aren't proof that the books are right. As the mistakes above show, some errors leave the totals equal. Others include:

• An entry that was never recorded at all.
• An entry recorded twice.
• The right amount posted to the wrong account, such as Rent Expense instead of Utilities Expense.
• An entry with the wrong amount on both sides.

When the totals don't match, a few quick checks find most problems. Recheck each T-account's addition. Make sure every account appears once. Then look at the difference between the totals: if it equals one account's balance, that account may be missing or on both sides; if it is twice an amount, that amount may be in the wrong column.

Trial balance or balance sheet?

The two are easy to confuse, because both list accounts and both "balance". They do different jobs.

• A trial balance is an internal working list. It includes every account in the ledger, including revenue, expenses and drawing, and its only test is that the debit and credit columns agree.
• A balance sheet is a financial statement for readers outside the bookkeeping team. It shows only assets, liabilities and equity at a date, and it balances in the sense that assets equal liabilities plus equity.

Revenue and expense balances from the trial balance feed the income statement instead. Their net result, the profit or loss for the period, then flows into equity. In the Juniper example, Service Revenue of $1,160.00 less Utilities Expense of $1,161.01 gives a loss of $1.01 for September.

Doing it in a spreadsheet

In practice, ledgers are long, and trial balances are usually built with formulas rather than by hand. The same logic applies: total each account's debits and credits, take the difference, and show it in one column. See trial balance in Excel for the formulas, including conditional sums and a balance check. After the books are adjusted, closing entries reset the revenue and expense accounts for the next period.