When was the last time you checked the trial balance?  The trial balance is often overlooked as an important report and preference is often given to the profit and loss statement, balance sheet and cash flow statement.

The trial balance is a very useful report as it lists the balance in each account at the end of the relevant period of time.

The primary purpose of the trial balance is to ensure that the credits and debits match each other and confirms that the accounts are in balance.

It is important to note that this does not mean there are no errors as mistakes could still exist but it does provide a level of confidence compared to a trial balance that does not balance.

If you are a volunteer treasurer, another important reason for reviewing the trial balance is that it gives you a list of every account on the accounting system.  Often when you prepare the profit and loss statement, balance sheet and cash flow statement the totals shown are often made up of more than one account.

For example, current assets may be shown as one figure on your balance sheet where as it may be made up of, for example, furniture and fittings, office equipment or motor vehicles.  In addition, on a profit a loss statement you may have one total figure for Income that is made up of, for example, donations, grants or memberships fees.

There is nothing wrong with a report that consolidates the totals but in some cases, having a report with each individual account shown may not only be too long, but very confusing to analyse and make decisions on.  The important issue is that you know and understand what accounts relate to that total.

The next post highlights some additional reasons why the trial balance is useful and should be reviewed on a regular basis.