Trial Balance: Source of Truth or Just a Checkpoint?

The Hierarchy of Truth in Bookkeeping

Based on Philippine accounting and BIR standards, here's the correct hierarchy of "truth" in accounting:

1. Source Documents (Primary Truth)

These are your official receipts, invoices, vouchers, deposit slips, contracts, and other supporting documents. They are the legal and audit evidence for every transaction.

Without a source document, an entry is not valid in BIR audit.

2. Journals (Chronological Truth)

Books where transactions are first recorded chronologically:

• General Journal
• Cash Receipts Journal (CRJ)
• Cash Disbursements Journal (CDJ)

Each journal entry must be backed by a source document.

Journals = first-level accounting truth.

3. General Ledger (Summarized Truth)

All journal entries are posted to the ledger by account. Balances here reflect the net movement of each account.

Ledger = structured version of the truth.

4. Trial Balance (Verification Tool)

This is a mathematical test of the ledger. It only shows if total debits = total credits, not whether the data is correct.

If TB balances, it means math is right — not necessarily that all entries are true or complete.

5. Financial Statements (Reports Derived from Truth)

Income Statement, Balance Sheet, and other financial reports are derived from the trial balance — but only as reliable as the accuracy of journals and source documents.

Summary Table: Levels of Accounting Truth

Level	Description	"Truth" Role
Source Documents	Receipts, invoices, contracts	✅ Legal and factual proof
Journals	Initial transaction logs	✅ Chronological truth
General Ledger	Account-level summary	✅ Accounting truth
Trial Balance	Totals check	⚙️ Verification only
Financial Statements	Reports	📊 Derived view

Key Takeaways

• The Trial Balance confirms arithmetic accuracy, but it does not validate the correctness of entries.
• A balanced trial balance can coexist with errors such as:
  • Posting to the wrong account
  • Transposition errors
  • Missing entries
  • Duplicate postings
• The General Ledger and source documents are the true foundation of your bookkeeping and BIR audit defense.
• For BIR compliance, you must maintain proper documentation at the source document level, not just ensure the trial balance balances.

Conclusion

The Trial Balance confirms arithmetic accuracy, but the General Ledger and source documents are the true foundation of your bookkeeping and BIR audit defense.

Always prioritize accuracy at the source document and journal level, and use the trial balance as a verification checkpoint — not as proof of correctness.