Trial balance: learn how to do and analyze

The entrepreneur needs to deal all the time with several financial statements . One of them is the Balance Sheet, which is compared to a picture of the company’s financial situation at the end of each year. But have you ever heard of Trial Balance?

This document works as a partial result of the Balance Sheet and can be issued before the calculation of the result of each year. In this way, the company’s management is able to monitor the progress of its activities more closely.

In this content, we are going to talk more about the Verification Trial Balance, showing its importance for the business and bringing a step by step for its elaboration. Follow!

What is a Trial Balance?

The verification trial balance is a financial statement, usually prepared before the Balance Sheet, which provides information on the company’s equity values, income values, credit and debit transactions and balances.

Unlike the Balance Sheet, its preparation is not mandatory for the company, but even so, it can be very useful for management to have access to data on business performance.

Find out what the verification balance sheet is for

The verification balance sheet is a statement for managerial purposes, that is, it helps the company’s management to monitor its budget, cash flow and bank balances. Through this document, it is possible to verify, for example, if the company made excessive, unnecessary expenses or if there were failures in its financial management.

The statement is also used as a basis for preparing other reports, such as the Income Statement for the Year (DRE) and the Balance Sheet itself.

If adopted from the beginning of business activities, the verification balance sheet also helps the entrepreneur to make adjustments before verifying whether the company made a profit or a loss. After that, another document is generated, called the final trial balance, which can be expanded to become the Balance Sheet.

How important is the verification balance sheet for your business?

The verification balance brings a summary of all the financial movements made by the company in a given period, in addition to showing the debit and credit balances. Through it, the entrepreneur can have an overview of everything that happens in his accounts and make a quick diagnosis of the financial health of the business.

This is essential for maintaining the business, as poor financial management is one of the main causes of company closures in Brazil.

Verification of this balance sheet also allows the entrepreneur to identify flaws and errors. Thus, you can solve them before they become bigger problems, causing losses and penalties imposed by the tax authorities.

How to make a trial balance sheet?

Now that you know what the verification balance sheet is and what it is used for in companies, how about checking out a step-by-step guide to preparing it?

Determine the period to be analyzed

The first step in creating the checking balance sheet is to determine the period that will be analyzed by the document. The most common thing is that it is done monthly, but that is not a rule.

You can work with quarterly, weekly or annual statements, depending on your company’s turnover and leadership needs.

Define what will be checked

Then you need to define which elements will be part of the report. Here you must also consider the particularities of each business. However, in general, this type of document provides information about the nature of each account (creditor or debtor) and the movements and balances of each one of them.