What is a trial balance?
Published
A trial balance lists the closing balance of every account at a given date in two columns, debit and credit. Where double-entry has been applied correctly, the two totals agree.
The equations
Σ Debit balances = Σ Credit balancesClosing balance = Opening balance + Total debits − Total credits(Signs invert for accounts with a natural credit balance.)
Net VAT payable = Output VAT balance − Input VAT balanceA positive result is owed to ZATCA; a negative result is refundable or carried forward.
A full trial balance - Al-Waha, 30 June 2026
| Account | Debit | Credit |
|---|---|---|
| Bank - operating account | 182,400 | |
| Accounts receivable | 96,750 | |
| Inventory | 141,200 | |
| Input VAT | 19,300 | |
| Furniture and equipment (at cost) | 92,000 | |
| Accumulated depreciation | 17,400 | |
| Accounts payable | 78,900 | |
| Output VAT | 34,500 | |
| End-of-service benefit provision | 41,600 | |
| Capital | 200,000 | |
| Retained earnings (opening) | 150,000 | |
| Owner's current account (drawings) | 18,000 | |
| Sales | 460,000 | |
| Cost of sales | 268,000 | |
| Salaries and wages | 84,000 | |
| Rent | 36,000 | |
| Marketing | 22,500 | |
| Administrative expenses | 18,250 | |
| Finance costs | 4,000 | |
| Total | 982,400 | 982,400 |
The errors a trial balance will not catch
This is the most important - and most misunderstood - point on the page. A balanced trial balance does not mean the books are right. Four errors leave it perfectly balanced:
1. Classification error SAR 12,000 of rent posted to utilities.
| Debit | Credit | |
|---|---|---|
| Utilities (wrong) | 12,000 | |
| Bank | 12,000 |
Totals fine, sides fine, account wrong. Rent is understated by 12,000 and utilities overstated by 12,000. Net profit is unchanged, but every period-on-period comparison is now misleading.
2. Complete omission A purchase invoice for SAR 8,050 never entered. Nothing is missing from one side, because no entry exists. Expenses understated by 7,000, input VAT of 1,050 forfeited, payables understated by 8,050.
3. Compensating error Sales recorded as 4,600 instead of 6,400 (1,800 short) while an expense is recorded 1,800 low. The two errors cancel exactly in the trial balance.
4. Fully reversed entry A customer receipt posted as:
| Debit | Credit | |
|---|---|---|
| Accounts receivable | 20,000 | |
| Bank | 20,000 |
instead of the reverse. Totals agree, direction is inverted. Bank is understated by 40,000 and receivables overstated by 40,000 - twice the amount in each direction.
Conclusion: a trial balance detects one class of problem, the arithmetic kind. It cannot detect a judgement error. Reviewing the individual balances monthly - not just the total - is what actually protects the books.
Practical use: reconciling the VAT return before filing
From Al-Waha's trial balance, assuming the VAT balances relate to the open tax period:
Output VAT = SAR 34,500 → taxable sales = 34,500 ÷ 0.15 = SAR 230,000Input VAT = SAR 19,300 → taxable purchases = 19,300 ÷ 0.15 = SAR 128,666.67Net payable = 34,500 − 19,300 = SAR 15,200
Reconciliation steps:
- Pull the trial balance dated exactly at the tax period end.
- Divide the output VAT balance by 0.15 and compare to total taxable supplies on the return.
- Do the same for input VAT against deductible purchases.
- Explain any gap before filing, not after.
Gaps with legitimate causes: exempt supplies, zero-rated supplies, exports, prior-period adjustments, credit notes, and purchases whose input tax is not deductible.
Gaps that indicate an error: an invoice posted gross without splitting the tax, a sales invoice never posted, or a transaction dated outside the period.
Trial balance vs. balance sheet
| Trial balance | Balance sheet | |
|---|---|---|
| Purpose | Internal checking tool | Formal financial statement |
| Shows | Every account, including revenue and expenses | Assets, liabilities, and equity only |
| Timing | Any moment, before closing | After result accounts are closed |
| Audience | Accountant and management | Bank, investor, auditor, authorities |
In Al-Waha's case the trial balance totals SAR 982,400 while the balance sheet totals SAR 514,250. The difference is the result accounts - sales, costs, expenses - which close into retained earnings and never appear on the balance sheet.
Frequently asked questions
Why doesn't my trial balance balance?
In a system that enforces double-entry this is rare. It usually points to an opening balance entered on one side only, an incomplete import from an external file, a deactivated account still carrying a balance, or a transaction dated outside the report range.
What is the difference between an unadjusted and an adjusted trial balance?
The unadjusted version shows balances as they stand from daily transactions. The adjusted version includes period-end entries - depreciation, accruals, prepayments, end-of-service provision. Financial statements are built only from the adjusted version.
Should I review it monthly?
A monthly review catches errors while they are small and the context is still fresh. An annual review means correcting twelve months at once under closing pressure, usually after four VAT returns have already been filed on unreviewed numbers.
What specifically should I look at?
Any balance with an unnatural sign (a credit bank, a debit supplier), any zero balance on an account that should have moved, any large jump from the prior month, and the owner's current account.