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ACCA Applied Knowledge · Financial Accounting

Trial Balance for ACCA Financial Accounting (FA)

A trial balance is a list of all ledger account balances at a date, split into debits and credits. If double entry was done correctly, total debits equal total credits. To solve questions, classify each balance, total both sides, and trace any difference to an error or a suspense account.

What this chapter covers

The trial balance is the checkpoint between bookkeeping and financial statements. You take the balance on every ledger account, list debit balances in one column and credit balances in the other, and add each column. If the totals agree, the double-entry records are arithmetically balanced. If they do not, something is wrong.

This chapter teaches you four skills. First, know which accounts normally carry debit balances (assets, expenses, drawings) and which carry credit balances (liabilities, capital, income). Second, know which errors still leave the trial balance balanced, such as complete omission of both sides, commission, principle, compensating errors, original entry and reversal of entries. Third, know how to use a suspense account to hold a difference temporarily, then clear it with journals. Fourth, know what the trial balance can and cannot prove.

The chapter links to almost everything else in FA. Adjustments for depreciation, irrecoverable debts, accruals and inventory start from trial balance figures. Accounts preparation questions in Section B often give you a trial balance and ask for the statement of profit or loss and statement of financial position. Bank reconciliations and control account reconciliations also feed corrections into it.

Trial balance questions appear in the objective test section as quick two-mark items, and the same skills sit underneath the longer multi-task accounts preparation question. If you misclassify a balance or miss a correcting journal, the error carries into profit and net assets. The rules are small in number and very testable, so this chapter gives you reliable marks for modest effort, and it makes later chapters easier.

Trial balance: topics in the order to study them

  1. 1Purpose and Format of a Trial BalanceStart here to understand what the list is for and how it is laid out before handling any figures.
  2. 2Debit and Credit Balances of Ledger AccountsYou must classify each balance correctly before you can total a trial balance or spot a wrong-side entry.
  3. 3Errors the Trial Balance Does Not RevealOnce you can balance one, learn the errors that leave it balanced, so you know its blind spots.
  4. 4Suspense Accounts and Correcting ErrorsThis applies the error types: you write journals and see how the suspense balance clears.
  5. 5Limitations of the Trial Balance and Its Role in Financial StatementsFinish by tying it together: what a balanced trial balance proves, and how it feeds the final accounts.

How to prepare Trial balance

Work from the rules to practice. Most marks come from classifying balances and writing correct journals, so drill those under timed conditions.

  1. Learn the normal balance of each account type: assets and expenses debit; liabilities, capital and income credit. Test yourself on a list of twenty accounts until it is instant.
  2. Practise totalling a trial balance from a list of balances, including items like drawings, returns and provisions, and finding the difference.
  3. Memorise the six error types with one example each. For every example, ask: does the trial balance still balance?
  4. For each error, write the correcting journal. Check that debits equal credits, and decide if suspense is involved.
  5. Practise suspense questions: open the account with the difference, post each correction, and confirm it clears to nil. Note that a one-sided entry or a difference in totals is cleared through suspense, while an error with both sides posted is corrected by a journal between the real accounts.
  6. Work through corrections to profit: decide whether each error changes profit, and by how much, then restate the figure.
  7. Finish with mixed objective questions. For multiple response, read the stated number to select. For number entry, check the sign and the format asked.

Common mistakes in Trial balance

  • Putting a balance on the wrong side of the trial balance

    Fix: Classify each account as asset, expense, liability, capital or income first. Then apply the normal balance rule.

  • Thinking a balanced trial balance means no errors

    Fix: Remember it only shows arithmetic agreement. Check the six error types that do not disturb it.

  • Using suspense for errors that do not cause a difference

    Fix: Use suspense only when the entry was one-sided or totals disagree. Errors with both sides posted need a journal between the real accounts.

  • Reversing the debit and credit in a correcting journal

    Fix: First write the entry that was made, then the entry that should have been made. The journal is the difference between them.

  • Getting the effect on profit wrong

    Fix: After each journal, ask whether an income or expense account is involved. Only then does profit change.

  • Ignoring the question instruction in objective formats

    Fix: Read what is asked before calculating: debit or credit, increase or decrease, and how many options to select.

Last-day revision: Trial balance

  • A trial balance lists all ledger balances at a date; total debits should equal total credits.
  • Debit balances: assets, expenses, drawings, receivables. Credit balances: liabilities, capital, income, payables.
  • A balanced trial balance does not prove the records are correct.
  • Error of omission: a transaction left out completely, with both sides missing, so it still balances. Omitting only one side is a one-sided entry, and the trial balance then disagrees.
  • Error of commission: right type of account, wrong account; still balances.
  • Error of principle: wrong type of account, such as capital item treated as expense; still balances.
  • Compensating errors: two errors of equal and opposite amount; still balances.
  • Error of original entry: wrong amount used on both sides; still balances.
  • Reversal of entries: debit and credit sides swapped; still balances.
  • A suspense account holds a difference temporarily until the cause is found; it is not a permanent balance.
  • A one-sided entry, a wrong total, or a transposition error on only one side of an entry makes the trial balance disagree.
  • Correcting journals: check they balance, then see if profit changes.

Trial balance practice questions

Trial balance in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Trial balance: frequently asked questions

What is the main purpose of a trial balance?

It checks that the total of debit balances equals the total of credit balances after double entry. It also provides a starting list of figures for preparing the financial statements.

Which errors does a trial balance not detect?

It does not detect complete omission of a transaction (both sides left out), commission, principle, original entry, reversal of entries or compensating errors. In each case the debits and credits stay equal. Omitting only one side of an entry does make the trial balance disagree.

When do I use a suspense account?

Use it when the trial balance does not balance and you cannot yet find the cause, or when you know an entry was one-sided. You post the difference to suspense, then clear it as you correct each error.

How is this chapter tested in the FA exam?

It appears in Section A as short objective questions on balances, error types and correcting journals. The same skills also support the accounts preparation question in Section B.