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Accounting
Terms

Trial Balance

Definition

A trial balance is a report that lists all the company's accounts and their balances at a specific point in time, showing both debits and credits. The main goal of a trial balance is to make sure everything adds up correctly—total debits should equal total credits. If they don't, it signals that there might be errors in a company's bookkeeping that need fixing.

Why it matters

A trial balance matters because it’s like giving your business a financial health check. It helps you spot any errors before they show up on your financial statements. If the numbers don’t add up—if debits don’t match credits—then something’s off in your records, and it could affect your decisions.

Think about it: you wouldn’t want to base plans on numbers that aren’t accurate. The trial balance catches things like transactions accidentally recorded in the wrong accounts, numbers that don’t add up, or other bookkeeping mistakes. By catching and fixing those errors early on, you’re making sure your financial statements are reliable. This way, when you’re presenting numbers to investors or planning future moves, you can trust the info is correct. Plus, it keeps things smooth for tax season, so no surprises pop up that could cost you later!

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