Academy/Financial Statements for Non-Accountants
Trial balance
The internal check that proves the books add up before anyone builds a financial statement from them.
A trial balance is a report listing every account's ending balance from the general ledger, used to confirm that total debits equal total credits before the association's financial statements are prepared. It is an internal accounting check, not a statement itself, and boards rarely see it directly unless they ask.
What a trial balance actually is
A trial balance is not one of the association's two core financial statements. It is a working report that lists every account in the chart of accounts, cash, receivables, payables, revenue, expense, and shows each account's ending balance pulled straight from the general ledger. Its one job is to prove the books are mathematically sound before anyone builds a statement from them.
"A trial balance is an accounting report that states the ending balance in each general ledger account," produced "to ensure that the total of all debits equals the total of all credits."
Source: Trial balance definition, AccountingTools
Where it sits in the accounting process
Every transaction the association records, an assessment posted, a landscaping invoice paid, gets entered into the general ledger under one of the numbered accounts in the chart of accounts. At the end of the period, the trial balance pulls every account's ending balance into one list and totals the debit column and the credit column separately. If the two totals match, the ledger is in balance and the accountant can move on to building the balance sheet and income statement. If they don't match, something was posted incorrectly, and it has to be found before those statements can be trusted.
Some states go further and specify what board members must be shown every month, and the list varies. California's Civil Code, for example, requires the board to review the check register, the monthly general ledger, and delinquent assessment receivable reports every month.
"The board shall do all of the following" on a monthly basis, including review of "the check register, monthly general ledger, and delinquent assessment receivable reports."
Source: Civil Code Section 5500, State of California
What it does not tell you
A trial balance that balances proves the math is internally consistent. It does not prove every transaction landed in the right account. A payment coded to the wrong expense line still keeps debits equal to credits, so the trial balance will not catch it. It is an internal working paper; most boards never see it unless they ask their manager or CPA for it directly. Whether the numbers are correct, not just balanced, is a separate question, one that depends on who prepared the statements and at what level of scrutiny.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Your property manager mentions the trial balance was out of balance this month. What does that actually mean?
Which document is the trial balance built directly from?
A trial balance balances perfectly, debits equal credits. What can the board actually conclude from that?
Sources
- Trial balance definition, AccountingTools
- Chart of accounts definition, AccountingTools
- General ledger definition, AccountingTools
- Civil Code Section 5500, State of California
Financial Statements for Non-Accountants
Once the trial balance checks out, the numbers flow into the two statements every board actually reads: the balance sheet and the income statement.
Whether a board has any right to see the trial balance or general ledger, and how often, varies by state and by the association's governing documents.