If you or your bookkeeping services provider is in the process of preparing your business’ financial statements, then you’ve probably heard of a Trial Balance. A Trial Balance is a snapshot of your books on a particular date—an internal report that lists all balances in your business’ General Ledger accounts. Bookkeepers use a Trial Balance to uncover errors.
If you work with a bookkeeping services provider, you can ask to see how your Trial Balance is put together. On one side of your Trial Balance you’ll list your debit balances, and on the other side your credit balances. The goal is for both columns to be balanced—the sum total of the debit balances should equal that of the credit balances.
If the Trial Balance shows that the columns are not equal, this may mean that errors were made when posting income and expense entries. For example, if your business received a payment for a service not yet performed, your bookkeeper should not post it to the revenue account until the service has been performed.
After you have adjusted the Trial Balance, those numbers are used for the preparation of your business’ financial statements. Financial statements are important for you, your business, and your bookkeeping services provider. Preparing the Income Statement, Balance Sheet, and Cash Flow Statement accurately and in a timely manner is the best way to stay on top of your books, get a clear understanding of your company’s financial situation, and set your goals for the period to come.