What is a trial balance?

A trial balance is accurately defined as a list of all accounts with their balances at a specific point in time. It serves as an important internal report within the accounting process, primarily designed to help ensure the accuracy of the bookkeeping system. By compiling all the account balances from the general ledger, the trial balance checks that the total debits equal the total credits, which is a fundamental principle of double-entry accounting.

This process helps accountants identify any discrepancies or errors that may have occurred in the recording of transactions. If the two totals do not match, it indicates that there may have been mistakes made in the recording process, prompting further investigation.

The other options describe different financial concepts which are not what a trial balance represents. A summary of all transactions in a fiscal year refers to something more akin to a financial statement rather than the specific snapshot provided by a trial balance. The mention of a financial statement that presents cash flows pertains to the cash flow statement, not a trial balance. Lastly, a report showing the owner’s equity refers to the statement of owner’s equity or equity section of the balance sheet, rather than the trial balance.