--- title: "Trial Balance Explained: How to Read and Fix One | MCC" description: "What a trial balance shows, how to read one, and how to find why debits and credits do not match. Includes a worked example and a real estate office version." url: "https://mcc-solutionsnj.com/bookkeeping/guides/trial-balance-explained" --- Bookkeeping guide · Updated October 12, 2026 # What Is a Trial Balance and How to Use One A trial balance is a list of every account with its balance, split into a debit column and a credit column. The two columns should add up to the same total. It is a quick health check of the whole system and the starting point for financial statements. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** A trial balance lists every account with its balance in a debit column and a credit column, from assets through equity, income and expenses. In healthy books the two column totals match. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) · [Closing entries and retained earnings](/bookkeeping/guides/closing-entries-and-retained-earnings) · [Void vs delete a transaction](/bookkeeping/guides/voiding-vs-deleting-transactions) **Free tools:** [Current ratio calculator](/bookkeeping/current-ratio-calculator) · [How many sales do I need to break even?](/bookkeeping/break-even-calculator) [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## What it looks like Accounts are listed from assets through equity, income and expenses. Each shows its balance on its normal side. At the bottom the totals appear. In a healthy set of books, they match. Run it as of a date, usually month end or year end. Compare to a prior date to see which accounts moved. ## What it proves If debits equal credits, the arithmetic of your entries is consistent. That is the extent of the proof. Modern software enforces balanced entries, so the trial balance nearly always balances. If it does not, there is a data problem, such as a corrupted import or a conversion error. It does not prove that each amount is in the correct account or that every transaction is recorded. ## Reading it for problems Scan each account against what you expect. Bank balances should match statements. Receivables and payables should match their detail reports. Look for accounts on the wrong side, such as a negative bank balance or an expense with a credit balance. Check for accounts with names that you do not recognize. Check liabilities for payroll taxes, sales tax and loans against filings and statements. ## A trial balance for a real estate office or rental properties Real estate books have a few accounts that come in matched pairs, and the trial balance is the fastest place to check them. For a brokerage, money held in escrow sits in a trust bank account (an asset) and the same amount appears as escrow owed to clients (a liability). On the trial balance the two should be equal. If they are not, a deposit or disbursement was recorded on one side only. For rental properties, tenants' security deposits work the same way: the deposit bank account and the security deposits held liability should match. New Jersey requires security deposits to be kept in a separate account, so a gap here is worth fixing quickly. Also check that rent collected in advance shows as a liability rather than income, and that each property's mortgage balance matches the lender's statement. A short example: Escrow bank account, debit $48,000. Escrow deposits owed to clients, credit $48,000. Security deposit bank account, debit $9,600. Security deposits held, credit $9,600. Both pairs match, so the money you hold for other people is fully accounted for. ## Adjusted and post-closing versions An unadjusted trial balance is run before adjusting entries. After depreciation, accruals and other adjustments, you have an adjusted trial balance, which feeds the profit and loss and the balance sheet. Accountants may also prepare a post-closing version, which includes only balance sheet accounts after the year's profit is rolled into equity. Comparing the unadjusted and adjusted versions shows the impact of your period-end entries. ## Practical uses Give your tax preparer an end-of-year trial balance. It lets them see the whole picture on one page and ask targeted questions. Use it before applying for a loan to confirm that the data lenders will see is clean. If you are learning accounting, build one by hand from a handful of sample entries. Seeing how balances roll up helps all the other reports make sense. After you reconcile, run the trial balance and take two minutes to compare it with last month. Highlight any account that changed by a large amount and write a one-line reason. Check that accounts like uncategorized income, ask my accountant and opening balance equity are empty or explained. This habit turns a technical report into a simple control and gives your bookkeeper or CPA a trail of notes to follow. Save a copy of the year-end version as a PDF or spreadsheet. If a question comes up later about what the books said on that date, the saved report answers it even if later edits have changed live reports. ## Worked example with numbers A tiny trial balance lists debit balances of cash $5,000, receivables $2,000 and rent expense $1,000, totaling $8,000. Credit balances are payables $1,500, owner equity $2,500 and sales $4,000, totaling $8,000. Debits equal credits, so the books are in balance. If the credit column were $7,900, the $100 gap points to a one-sided entry, a transposition, or a deleted transaction. Divide the difference by nine to test for a transposition: a gap divisible by 9 often means digits were swapped. ## Check your work After correcting the difference, rerun the trial balance and compare it to last month's. Large unexplained swings in any account deserve a look. ## Common questions **Is a trial balance a financial statement?** No. It is a working report. The financial statements are built from it. **Why might it be out of balance?** Usually due to imports, system errors or incomplete conversions. Entries made normally are balanced. **Do I need one?** Not for daily work, but it is useful at close and for your accountant. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Zoho Books Bookkeeping and reconciliation in Zoho Books for New Jersey businesses, especially those already using other Zoho apps. Zoho Books →](/bookkeeping/software/zoho-books) More guides - [Closing Entries and Retained Earnings Explained](/bookkeeping/guides/closing-entries-and-retained-earnings) - [Cost of Goods Sold Explained for Small Business](/bookkeeping/guides/cost-of-goods-sold-explained) - [Gross Margin vs Markup: Stop Mixing Them Up](/bookkeeping/guides/gross-margin-vs-markup) - [Break-Even Analysis: How Much Must You Sell?](/bookkeeping/guides/break-even-analysis-for-small-business) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). [![Cover of Bookkeeping Fundamentals (ebook) by Matthew Colt](/img/toolkits/bookkeeping-fundamentals-ebook/cover.webp)](/toolkits/bookkeeping-fundamentals-ebook) From the bookshelf ### Bookkeeping Fundamentals A college-level bookkeeping course, without the tuition. 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