A balance sheet is one of the main financial statements and is also known as the statement of financial position. The balance sheet is referred to as an external report because it is used outside of the company by investors, lenders, and others. The balance sheet reports on the organization’s assets, liabilities, and stockholders’ or owner’s equity as of a point in time—for example, as of midnight of April 30, 2009. The balance sheet also shows that the total of the asset amounts is equal to the total of the amounts of liabilities and stockholders’ equity.

A trial balance is an internal document used only within the accounting department. Its purpose is to show that the amounts of debits and credits within the accounting system are equal. The trial balance consists of three columns: the first column lists every account title having an account balance, the second column is for account balance if it is a debit balance, and the third column is for the account balance if it is a credit balance. The amounts in the debit column are summed and the amounts in the credit column are summed. The total amount of each column should be the same.

Learn more about the Balance Sheet.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

Learn more about AccountingCoach Pro