What is the purpose of a Trial Balance?

A Trial Balance serves to summarize all credits and debits in the general ledger of a business. This is an essential step in the accounting process that ensures the total amount of debits equals the total amount of credits, maintaining the accounting equation's integrity. The Trial Balance provides a snapshot of all accounts, which allows accountants to verify that all financial transactions have been accurately recorded. This summary helps identify any discrepancies or errors in the accounting records before moving on to prepare financial statements.

While the preparation of financial statements and assessing profit margins are important aspects of accounting, they are subsequent steps that rely on the accuracy of the Trial Balance. Similarly, calculating taxes owed is based on figures derived from financial statements, emphasizing the foundational role of a Trial Balance in the accounting process.