ACFE Accounting Terms Practice Test

What is the purpose of a trial balance in the accounting cycle?

To list all accounts and their balances in order. To verify that total debits equal total credits after posting and to help detect posting errors before preparing financial statements. To determine net income for the period. To adjust accounts for accruals and deferrals.

Correct Answer:

To verify that total debits equal total credits after posting and to help detect posting errors before preparing financial statements.

Explanation:

The main idea here is that a trial balance serves as a checkpoint in the accounting cycle. It gathers every general ledger account with its ending balance and totals the debits and credits to see if they are equal. When the double-entry system is correctly recorded, these totals match, which helps confirm that posting is technically correct and that no simple errors slipped in. This makes the trial balance a useful early tool for detecting posting mistakes before financial statements are prepared. It also provides a starting point for identifying which accounts may need adjusting, but it does not itself determine net income. Net income comes from revenues minus expenses after adjustments, not from the trial balance alone.

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