Trial_balance

In accounting, the trial balance is a worksheet wherein all the balances of each ledger are entered in two columns, namely debit and credit. The Trial balance is prepared in each financial period as a summary of the closing of the previous ledger. The total of the debit side should always be equal to the total of the credit side, which proves the arithmetic accuracy of the ledger entry. Often credits will be represented as a negative leading the total of the trial balance to be 0. The trial balance thus serves as a tool to detect errors, which may have occurred during the double-entry system of the ledger. However, a balanced trial balance does not necessarily guarantee that there is no error. For example, a transaction could have been removed from the ledger account, a journal entry might have been posted in the wrong ledger, or debit and credit entries could have been transposed: One feature of the double entry system that often confuses users, is that the terms \'credit\' and \'debit\' are used in the opposite way to the perspective taken, e.g., in typical bank account statements. Mistakes due to such misunderstandings are not apparent in the trial balance. Trial balances help maintain organization.

A credit to the owner of a business is usually a liability, e.g an accrual, loan etc. A credit may also be revenue or sales using the double entry system. A debit is generally classed as an asset e.g money in the bank or elsewhere, stock, property etc, but is also known as a purchase or expense when carried out using the double entry system. In the eye of the beholder (you), receiving money increases your assets and is therefore a debit, since where you have cashed this money into the bank, it is a credit to the bank and they now owe it to you. Whereas if you go into your overdraft, you are liable for that money which is a credit, but to the bank they are owed that money .... therefore a debit.

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