Final answer:
A trial balance is a list of all account balances in a company's general ledger, including personal, real, and nominal accounts, with the goal of showing that total debits equal total credits. It reflects the accounting equation and helps prepare for the creation of financial statements. Therefore, the correct option is C.
Step-by-step explanation:
The trial balance is a list of the balances of all accounts in the general ledger of a company at a specific point in time. The trial balance contains personal, real, and nominal accounts, which include the business's assets, liabilities, and equity, as well as revenue and expense accounts.
When a trial balance is prepared, the total of all debit balances should equal the total of all credit balances, ensuring that the accounting equation (Assets = Liabilities + Equity) is in balance. This is similar to the concept of a balance sheet, which also aims to show that a company's total assets are equal to the combined total of liabilities and equity, reflecting the principle that for a healthy business, net worth should be positive.
If the trial balance does not balance, this indicates that there are errors in the accounting entries that must be investigated and corrected before financial statements can be generated.