How do we check that the debits and credits in the ledger agree?
Prepare a trial balance from a list of ledger balances and explain its purpose
A simple answer to the N(A)-Level Principles of Accounts outcome on the trial balance. What a trial balance is, which balances go on the debit and credit sides, how to total it, and what it can and cannot prove.
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What this dot point is asking
SEAB wants you to prepare a trial balance from ledger balances and to explain what it is for. The trial balance is the checkpoint between the ledger and the financial statements: it lists every balance and tests that debits equal credits. The central insight is that a trial balance proves the books are arithmetically in balance, but it does not prove they are free of errors.
The answer
What a trial balance is
A trial balance is a list of all the ledger balances at a date, set out in two columns, debit and credit. If the double entry has been done correctly, the two columns should add up to the same total.
Which side each balance goes on
Use the normal balance of each element:
| On the debit side | On the credit side |
|---|---|
| Assets (cash, bank, inventory, receivables) | Liabilities (payables, loan) |
| Expenses (purchases, rent, wages) | Income (sales, rent received) |
| Drawings | Capital |
Preparing it
- List every account and its balance.
- Put each balance in the debit or credit column using the rule above.
- Total each column.
- Check that the two totals agree.
What it can and cannot do
If the totals agree, the ledger is arithmetically correct and ready for the financial statements. If they disagree, there is definitely an error to find. But an agreeing trial balance does not guarantee accuracy: several kinds of error leave the totals equal, as the next dot point explains.
Examples in context
Example 1. Spotting a posting slip. A bookkeeper prepares a trial balance and finds the debit side is \90$ higher than the credit side. The difference tells them at once that an error exists, and the round figure suggests a single mis-posting. The trial balance has done its job as an early-warning check, even before the exact error is found.
Example 2. A balanced but wrong ledger. Another business has a trial balance that agrees perfectly, yet a sale to a customer was never recorded at all. Because both the debit and the credit were omitted together, the totals still match. This shows why an agreeing trial balance is reassuring but not a guarantee, motivating the study of errors it cannot catch.
Try this
Q1. State the side of the trial balance on which a bank loan appears. [1 mark]
- Cue. The credit side, because a loan is a liability with a credit balance.
Q2. Total these debit balances: purchases \5,000\, drawings \2,000$. [2 marks]
- Cue. 5\,000 + 900 + 2\,000 = \7,900$.
Q3. Explain why a trial balance that agrees does not prove the accounts are correct. [2 marks]
- Cue. Some errors, such as a complete omission or an entry in the wrong account of the right type, leave both totals equal, so the trial balance still agrees.
Exam-style practice questions
Practice questions written in the style of SEAB exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Original6 marksPlace each balance on the correct side of a trial balance: capital \10\,000\; sales \9\,000\; trade payables \2\,000\. Then state whether it balances.Show worked answer →
Debit balances: purchases \6,000\; cash \1,800= \.
Credit balances: capital \10,000\; trade payables \2,000= \.
These do not balance ( against ), which tells us a balance is missing (here there is no balancing item such as inventory or a bank figure shown, so as listed it does not agree).
What markers reward: assets and expenses on the debit side, income, liabilities and capital on the credit side, correct totals, and a clear statement of whether the two sides agree.
Original4 marksExplain the purpose of a trial balance and state one limitation.Show worked answer →
The purpose of a trial balance is to check the arithmetical accuracy of the double entry: if total debits equal total credits, the ledger is arithmetically in balance, and the figures can be used to prepare the financial statements.
One limitation: a trial balance that agrees does not prove the books are free of errors. Some errors, such as a complete omission or an entry in the wrong account, do not affect the totals, so the trial balance can still balance despite them.
What markers reward: stating that the trial balance checks that debits equal credits and helps prepare the statements, plus one valid limitation such as errors that do not affect the totals.
Related dot points
- Identify the errors that do not affect the agreement of a trial balance
A simple answer to the N(A)-Level Principles of Accounts outcome on errors. The six errors that leave a trial balance agreeing, what each one is, and a worked check that the totals stay equal.
- Correct errors using the general journal and use a suspense account for a difference on the trial balance
A simple answer to the N(A)-Level Principles of Accounts outcome on correcting errors. How to write a correcting journal entry, when a suspense account is opened, and how corrections clear the suspense balance.
- Balance off ledger accounts and bring down the balance, identifying it as a debit or credit balance
A simple answer to the N(A)-Level Principles of Accounts outcome on balancing accounts. How to total each side, insert the balance carried down, bring it down for the next period, and say whether it is a debit or credit balance.
- Prepare the financial statements of a sole trader from a trial balance with year-end adjustments
A simple answer to the N(A)-Level Principles of Accounts outcome on building the statements. Which trial balance items go to the income statement and which to the balance sheet, and how adjustments are applied to each.