Numerous transactions take place in business every day. They are first recorded in some books of original entry i.e., Journal Proper or one of its sub-divisions. Then they are posted to the appropriate accounts in the ledger. Each ledger account is balanced periodically so as to ascertain the net effect of various transactions posted therein. In the process, some accounts may get closed, while the others may show a debit or a credit balance. Based on these balances, the final accounts are prepared for ascertaining the profit or loss and the financial position of the business. The quality and reliability of the results obtained depend largely on the correctness of the entries made in various books of account. Hence, it is necessary to ascertain the accuracy of these entries before we proceed with the preparation of final accounts.

For this purpose, we prepare a statement called 'Trial Balance', which shows balances of all the ledger accounts. As we studied in Unit 6, the ruling of trial  balance is similar to that of journal. We write the name of each account in the particulars column. If the account shows a debit balance, its amount is entered in the debit balances column and if it shows a credit balance the amount is entered in the credit balances column. We know that the total of the debit balances column must tally with the total of the credit balances column, because for every debit there is a corresponding credit and vice versa.

When the two totals tally, it is considered as a preliminary proof of the arithmetical accuracy of entries in the books of accounts. It is an assurance that posting into ledger has been correctly done and that equality between debits and credits has been maintained throughout. If, however, the two totals do not tally it implies that there are errors in the books of account.

Trial Balance can thus be defined as a statement (or a schedule) listing, in separate columns, the debit and credit balances of all ledger accounts on a particular date. It indicates whether or not the books of account have been written in accordance with the rules of double entry and ensures, to a great extent, the arithmetical accuracy of accounting entries.