The trial balance — Accounting Module 8 | LeadAfrik Public Economics Hub

At period-end, the trial balance is the first checkpoint before anything else happens. You list every account, its balance, and the side (debit or credit) it sits on. You add up both columns. They must equal. If they don't, you have an arithmetic error to find before producing financial statements.

What a trial balance looks like

text

TRIAL BALANCE as at 31 January 2026 — Acme Coffee Ltd
────────────────────────────────────────────────────────
  Account                              Debit       Credit
────────────────────────────────────────────────────────
  1100 Cash                          1,000,000
  1200 Accounts Receivable              45,000
  1300 Inventory                        20,000
  1500 Equipment                       400,000
  1700 Accumulated Depreciation                     8,000
  2100 Accounts Payable                            50,000
  2500 Bank Loan                                  300,000
  3100 Owner's Capital                            500,000
  3500 Retained Earnings                                0
  4100 Sales Revenue                              300,000
  5100 Cost of Goods Sold              130,000
  6100 Rent Expense                     80,000
  6300 Salaries Expense                150,000
  6900 Depreciation                      8,000
  7500 Interest Expense                  5,000
────────────────────────────────────────────────────────
  TOTALS                             1,838,000  1,158,000

  Wait — those don't match. There's a 680,000 difference.
  Check #1: Did I include all accounts? Yes.
  Check #2: Did I copy balances correctly? Re-check...

An unbalanced trial balance. The error has to be found before any financial statement is built on this foundation.

What an unbalanced trial balance tells you

The difference between debit and credit totals tells you something about the error:

Difference equals a transaction amount: probably a one-sided posting (one of the two sides was missed).
Difference divisible by 9: likely a transposition error (1530 entered as 1350, etc.).
Difference divisible by 2: an entry was likely posted on the wrong side.
Round number: arithmetic error in totalling.

What a balanced trial balance does NOT prove

A balanced trial balance proves arithmetic integrity, not correctness. It does NOT catch: (1) an entirely missing transaction; (2) a transaction posted to wrong accounts but balancing (e.g., utilities recorded as rent — both expenses, both debited); (3) a transaction posted at the wrong amount but consistent (KES 50k recorded everywhere as KES 5k); (4) compensating errors. The trial balance is a necessary check, not a sufficient one.

What comes next

The balanced trial balance is the foundation for: (1) adjusting entries (Module 9), which add the period-end accruals and deferrals; (2) the adjusted trial balance; (3) the financial statements proper — income statement first (using the revenue and expense rows), then the balance sheet (using assets, liabilities, equity rows), with retained earnings updated by net income from the income statement.

Exercise

The trial balance in the worked example doesn't balance. Without seeing the full ledger, what are three hypotheses for where the error might be? Walk through how you'd test each.