Trial balance and general ledger

You’ll need: Trial balance reports, General ledger reports — if you cannot see these, the module may be switched off for your business or outside your permissions. An administrator can change either.

Two reports that accountants ask for by name, and that most business owners have never opened. Both are more useful than they sound.

Trial balance

A trial balance lists every account with its balance as of a date. It takes a start date and an as-of date, plus the chart, basis and currency.

Its first job is arithmetic: total debits should equal total credits. If they do, the derivation is internally consistent.

Its second job is the one you will actually use it for — it is a list of everything, on one page. Scanning it is the fastest way to spot an account holding something absurd: a receivables figure far larger than your sales, a cash account that has gone negative, an expense account nobody recognises.

You do not need to read it as an accountant. Read it as somebody who knows the business and would notice a number that cannot be right.

General ledger

A general ledger report takes a start date and an end date and shows, per account, every movement across the period with a running balance.

This is where you go once the trial balance has made you suspicious. The trial balance says receivables are eleven million; the general ledger shows every entry that got it there.

   trial balance    every account, one balance each, at a date
   general ledger   one account at a time, every movement, over a period
   journal          every entry, in event order, with both sides

Three views of the same underlying entries, at three levels of zoom. Use the widest one that answers your question.

What to look at monthly

If you read nothing else, read the trial balance monthly and ask three questions:

Do the receivables look like a business that invoices what you invoice? A number that only grows means invoices are being raised and never collected.
Do the cash accounts match reality? These you can check against a bank statement in minutes.
Is there anything you do not recognise?

That is ten minutes and it catches most things while they are still small.

Do not chase pennies

A trial balance that is out by a rounding amount across a large business is rarely worth an afternoon. A trial balance out by a meaningful amount, or an account that has moved in a direction it should not, always is.

Judgement about which is which is the skill; the reports only present the evidence.

Try it