How to Define a Trial Balance

Video Transcript

"In this clip, we're going to talk about creating a trial balance. A trial balance is essentially a listing of all of your accounts with debits on one side, credits on the other side, and the sum at the bottom of your debits and credits equaling so that it balances. It's just a listing. This is an example of what a trial balance would look like. You can see that you would have the accounts listed and the debits and credits for those accounts listed. Each type of account has a natural either debit or credit balance, and these are some examples of some typical balance sheet accounts that a company would have. Cash has a natural debit balance, and in this example, we have 50 dollars in cash. Prepaids also have a natural debit balance. In this example, we have 75 dollars in cash. AP has a natural credit balance because it's a liability, and deferred revenue has a natural credit balance because it's a liability to deliver services. So at the bottom, we have all of our debit accounts and all of our credit accounts and their balances, and you can see that they balance. So the debits and credits balance, and the accounts are listed, their balances are listed, and this is a trial balance."