What is the purpose of a trial balance?

The purpose of a trial balance is to verify that the rules of double-entry accounting have been followed. This is done by ensuring that the total of all debits equals the total of all credits in the accounting records. In double-entry accounting, every financial transaction affects at least two accounts: one is debited and the other is credited, maintaining the accounting equation's balance.

When a trial balance is prepared, it serves as a preliminary check to identify any discrepancies in the accounting entries before the preparation of financial statements. If the trial balance does not balance, it typically indicates that there may be errors such as incorrect ledger entries or miscalculations that need to be rectified. This step is crucial as it helps maintain the integrity of the financial reporting process. Thus, the primary purpose of a trial balance is to ensure that the accounting records are accurate and compliant with the double-entry system.

Assessing a company's profitability and preparing financial statements for external users occur after the trial balance is completed and confirmed to be correct. Summarizing cash flow statements is a separate accounting function focused specifically on the cash movements within a company and does not directly relate to the verification of double-entry principles.