What is a trial balance, and what does it indicate when total debits equal total credits?

• A. A trial balance lists all ledger balances; if total debits equal credits, the ledger postings are arithmetically balanced (though not a guarantee of accuracy of transactions).
• B. It provides detailed projections of future revenue.
• C. It reports the company's net income for the period.
• D. It lists the cash and cash equivalents only.

Answer: (A)

A trial balance is a listing of every account in the ledger with its ending balance, shown in debit and credit columns. The main check it provides is whether the totals of the debit and credit columns are equal. When total debits equal total credits, it shows the ledger postings are arithmetically balanced, meaning the basic double-entry arithmetic adds up. This confirms there aren’t arithmetic posting errors, but it doesn’t guarantee that every transaction is correct or complete—there could still be misclassifications, omissions, or fraud. If the totals don’t balance, it signals that something was posted incorrectly or a figure was omitted, and a review is needed.