What is the purpose of a trial balance and what does it reveal?

• A. It lists all revenue balances to verify profitability.
• B. It lists all ledger balances to verify that total debits equal total credits.
• C. It schedules cash flows for the year.
• D. It determines tax liabilities.

Answer: (B)

A trial balance is a tool to verify that the general ledger is arithmetically balanced by listing every ledger account and its debit or credit balance. It reveals whether total debits equal total credits, which is the necessary condition for the books to be in balance. This helps ensure the books are in correct mathematical order and provides a starting point for preparing financial statements. If the totals don’t match, it signals that there are errors in posting or arithmetic that need to be found and corrected. It does not measure profitability, schedule cash flows, or determine tax liabilities.