As I wrote in my post on double entry book-keeping, the dual nature of accounting transactions means that for every debit entry there is a matching credit entry and vice versa. It therefore follows that the total of all debit balances in the accounts must always be equal to the total of all credit balances.
To test this out, if we take all the balances on all of a business’s ledgers (i.e. the categories of transaction) as at the end of an accounting period and list them, showing debit balances in one column and credit balances in another column, the total of each of the two columns should be the same. This list is called a trial balance.
Preparation of a trial balance is beyond the scope of the LPC, as a trial balance is usually put together by the business itself or its accountants and forms the basis of information from which the financial statements, principally the Profit and Loss Account and Balance Sheet, are then compiled.
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