What is a trial balance?

A trial balance is a financial statement that provides a summary of all the accounts in a company's accounting system at a specific point in time. It includes both debit and credit balances for each account, which helps ensure that the total debits equal the total credits. This is important for maintaining the integrity of the accounting process, as it indicates that the books are in balance and errors can be identified and corrected.

The purpose of the trial balance is to serve as a preliminary step before the preparation of more formal financial statements, such as the income statement and balance sheet. By listing all accounts with their corresponding debits and credits, it provides a clear picture of the financial position of the entity at that moment.

Understanding that the other choices do not correctly represent a trial balance enhances comprehension of financial reporting. A report solely listing liabilities and equity would not encompass the full scope of accounts, while a summary of financial performance over multiple periods relates more to income statements than a trial balance. Lastly, an overview of all cash transactions does not address the comprehensive account listings required in a trial balance, as it would focus only on cash-related activities rather than the full range of accounts.