What is a trial balance?

A trial balance is a vital accounting report that consolidates all the ledger balances of an organization, ensuring that total debits equal total credits. This process is crucial in the double-entry accounting system, where every transaction affects at least two accounts and helps maintain the accounting equation: Assets = Liabilities + Equity. By preparing a trial balance, accountants can verify the mathematical accuracy of their bookkeeping entries and identify any discrepancies that may need to be rectified before moving on to the preparation of financial statements.

The other options do not align with the definition or purpose of a trial balance. The first option discusses cash flow projections, which relate to future income and expenditures rather than tracking current account balances. The third option pertains to profit margin analysis, which focuses on profitability but is not concerned with balance verification. Lastly, the fourth option mentions policies for budget allocation, which is about planning and management rather than the accounting process of checking account balances.