What is a trial balance? Definition, examples and reading

What is an accounting document called a trial balance? This accounting document, which takes the form of a table, serves as an overview of your business from an accounting and financial point of view.

In this article, you'll find out what it's made up of, including the different accounts in the General Chart of Accounts (GCAP), how it differs from the profit and loss account, and how to read it.

What is the purpose of the trial balance, and how can you construct it easily without getting lost in the accounting entries? Find the answers in the rest of this article, co-authored with Raphael Berguig, a chartered accountant and statutory auditor at Nexco.

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What is a trial balance? Definition

A trial balance is a non-mandatory accounting document that lists all the accounts in a company's general ledger.

It is an intermediate statement between the general ledger and the financial statements that make up the accounting balance sheet and income statement, present in the tax return.

💡 Note: there are several types of accounting balance, each with specific characteristics and meeting specific needs:

• the general ledger balance
• the auxiliary trial balance
• ageing trial balance.

Let's take a look at the three types of trial balance.

General trial balance

Definition of the trial balance

The trial balance groups together all the accounts of a company, following the order of the general chart of accounts (PCG), from class 1 to class 7.

For each item, it shows at least :

• the account number
• the account name
• total debits
• total credits
• the balance of each account.

Example of a trial balance

Le Journal du Net provides a clear example of a trial balance:

The trial balance

Definition of the trial balance

The trial balance includes only accounts payable and accounts receivable, i.e. the accounts attached to accounts 401 and 411 respectively of the French General Chart of Accounts.

For each item, it shows :

• the account number
• its name
• the balance at the start of the period,
• the balance at the end of the period,
• total debits
• total credits.

Example of a trial balance

Aged trial balance

Definition of the aged trial balance

The aged trial balance is based on trial balance data according to the date on which they are outstanding. In other words, it breaks down payables and receivables according to when they are due for payment.

Example of an aged trial balance

What is the role of the trial balance?

The trial balance is not compulsory: it will not be required by any administrative authority. However, they are an essential part of your business accounting. A genuine management and control tool, it enables you to :

• draw up the balance sheet and profit and loss account, in particular by calculating the profit or loss for the year,
• check all accounting entries,
• check that total debits and credits are equal. The balance must be "balanced",
• check the calculation of your VAT (Value Added Tax) returns.

In the more specific context of the aged trial balance, the interest will be :

• monitor trade receivables
• anticipate late payments,
• being up to date with supplier payments.

ℹ️ When should it be used?

The trial balance is often drawn up for interim financial statements or at the end of the financial year. Statutory auditors generally use them as a support.

How do you read and interpret a trial balance?

The trial balance takes the form of a 5-column table, as described above, which summarises the company's accounts over a given period.

It lists each account with its balance, the result of the difference between the credit and debit sides.

From left to right, here's how to read the contents of each column:

1. the account number,
2. the name (or heading) of the account,
3. the amount of debit transactions on this account,
4. the amount of credit transactions on this account,
5. the account balance, i.e. the difference between the debit and the credit.

💡 A balance is in debit if the total debits exceed the total credits. Conversely, a balance is in credit if the total debits are less than the total credits.

The trial balance lists all the movements concerning the company, i.e. :

• purchases and sales
• receivables and payables.

The trial balance establishes the balance of all the accounts affected over the period in question. It may cover :

• balance sheet accounts
• management accounts.

When reading your trial balance, you need to identify significant movements, especially if you compare the balances of the accounts for the current period with the previous period.

☝️ Try to spot any discrepancies and variations and identify their causes. They may :

• be the result of an oversight
• reveal a clerical error
• illustrate a change that needs to be deciphered, etc.

This search for explanations provides keys to understanding.

Finally, check that the total amount of debits corresponds to the total amount of credits, which means that the accounts are in balance. Thanks to this dynamic mirroring, you can analyse your company's financial situation and accounting life in real time.

How do you draw up a trial balance?

To draw up your trial balance, you need to have finished entering your transactions. These accounting entries are taken from your general ledger. In your trial balance, enter each account in ascending order according to its number: from class 1 to class 7.

Note that you can use accounting software to create your trial balance. What are the advantages of these tools?

• They automate the production of accounting documents, including the trial balance;
• They save you time and reduce the risk of errors by automatically entering transactions on the basis of previously entered data;
• they automatically link your account entries to the correct accounting account, with the bank reconciliation function.

These SaaS software packages are updated automatically and free of charge by the publishers to ensure that your accounting always complies with the latest legal requirements. They include :

• Itool accounting,
• Sage 100c accounting,

These online accounting software packages help you draw up your trial balance and all your accounting documents. Don't hesitate to ask!

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The trial balance, an essential document

The trial balance may not be compulsory, but it is essential: for managing your cash flow, balancing your accounts or drawing up your financial statements. Accounting software generates them in such a way as to make it easier for you to prepare, analyse and summarise them.