The previous post provided an overview of the trial balance whereas the next two posts explain in more detail why the trial balance is useful and should be prepared on a regular basis

There are many important reasons for reviewing the trial balance.

It can make it easy to identify mistakes as well as identify where the error may exists. 

For example, if a transaction which is normally a credit suddenly appears as a debit amount, or vice versa, then that could be an error that has occurred because of an incorrect allocation.

It can help you identify dormant or dead accounts. 

You may have an account that has a balance in it that hasn’t changed for a considerable period of time.  If this is the case then this could be due to an incorrect allocation or simply the account has ceased being used.  Often this happens because a new account has been created for a similar type of transaction.

For example, you may have an account for photocopy paper that has one transaction in it that occurred at the start of the year whereas the account of office supplies should be used to track these types of transactions.   In this situation it is more likely that a new account was incorrectly and needlessly set up.  When you have identified that this has occurred then you should transfer the amount from the dormant account to the correct account and then close the old account down.

While this may be a simple example if you have a lot of additional accounts set up incorrectly then it can make it hard to analyse and make decisions.  This point also highlights the importance of properly managing the Chart of Accounts and ensuring that any new account that is set up is approved.

In the next post we will look at more important reasons for reviewing the trial balance.