What is a trial balance?

A trial balance is an important financial report in accounting that provides a summary of all the balances of accounts at a specific point in time. Its primary purpose is to verify the arithmetic accuracy of the ledger accounts, ensuring that the total of debit balances equals the total of credit balances. This equality is crucial because it indicates that the double-entry accounting system is in balance, meaning that all debits have corresponding credits.

In practice, the trial balance facilitates the identification of errors in the accounts before the preparation of financial statements. If the total debits and total credits do not match, it prompts the accountant to investigate discrepancies, ensuring the integrity of the financial data.

Other options presented do not accurately reflect the definition or function of a trial balance. For example, a summary of all cash transactions focuses solely on cash movements and does not encompass the entire range of accounts. An income statement is a specific report detailing revenues and expenses over a particular period, while a record of all income and expenses outlines financial transactions rather than presenting a summarized snapshot of account balances. Thus, the correct characterization of a trial balance is that it lists account balances to confirm the equality of debits and credits at a given time.