What is the purpose of a trial balance?

The purpose of a trial balance is to verify that the total debits equal the total credits in the accounting records. This is crucial because it ensures that the double-entry accounting system is being followed correctly, where every transaction has an equal and opposite effect in the accounting equation. If the trial balance does not balance, it signals potential errors in the ledger accounts, such as misposted transactions, duplicate entries, or overlooked entries, which need to be investigated and corrected before the preparation of financial statements.

While summarizing total assets and liabilities, listing revenues earned, and calculating net profit are also important aspects of financial accounting, they are not the primary purpose of the trial balance. A trial balance does not directly provide information about profits or losses; instead, it serves as a preliminary check to ensure the accuracy of the data that will eventually lead to the preparation of comprehensive financial statements.