What is the purpose of a trial balance?

The purpose of a trial balance is to ensure that total debits equal total credits. This is a crucial step in the accounting process, as it serves as a check on the accuracy of the ledger accounts. When transactions are recorded in double-entry bookkeeping, every transaction affects at least two accounts—one account is debited, and another is credited. A trial balance is prepared by listing the balances of all ledger accounts at a particular point in time, and it helps to confirm that the accounting equation holds true.

If the total debits do not equal total credits, it indicates that there may have been an error in the recording of transactions, which necessitates further investigation and correction before the financial statements can be accurately prepared. While summarizing income and expenses or presenting a company's financial position are important functions of financial accounting, these activities occur after verifying the accuracy of the ledger through the trial balance process. Recording daily business transactions, meanwhile, is part of the operational aspect of accounting that occurs before this balancing act. Ensuring the equality of debits and credits is foundational to maintaining accurate financial records, making it the primary purpose of a trial balance.