The financial transaction that occurred is as follows:

- An asset was purchased for $400,000. It was recorded to the Asset section of the General Ledger with a Debit.

- Of the total purchase price, $250,000 was financed with some kind of Note Payable or similar borrowed money. The amount was recorded to the Liability section of the General Ledger with a Credit.

- Of the total purchase price, $150,000 was purchaced with the buyer's own money. That's why they have equity in the asset equal to $150,000. The amount was recorded to the Owner's Equity section with a Credit.

The Purpose of a Trial Balance is to confirm that all entries recorded in the General Ledger balance. Said differently, the Trial Balance is a tool used to make sure that all the debits match all the credits. If the Company's accountant made an error when recording a transaction to the General Ledger accounts (i.e. the T accounts) it would show up in the Trial Balance because it "wouldn't actually balance" since total debits wouldn't equal total credits.

The trial balance can also catch transposition errors and other mistakes. For example, the trial balance shown above is off by $900. Do you see where the transposition error occurred? Take another look at the commissions account.