Trial Balance - FundsNet

Example of a Trial Balance TrialBalanceDefinedwithFormula,Examples,Format&SampleSheetLisaBorgaSeeallarticlesLastUpdated:November16,2021DatePublished:November16,2021WhatIsaTrialBalance?Thetrialbalanceisareportusedinbookkeepinginwhichthebalancesfromthegeneralledgerarerecorded.Thetrialbalanceliststheclosingbalancesoftheaccountsfromthegeneralledgerasofaspecificdate.Thisreportisusuallycompletedbeforepreparingabusiness’sfinancialstatements.KeyPointsofTrialBalanceAtrialbalancewilllistalloftheaccountsfromthegeneralledgerandtheirbalances.Ithasthreecolumnswithalloftheaccounttitlesinthefirstcolumn.Thesecondcolumnhasalloftheaccountswithdebitbalances,andtheaccountswithcreditbalancesareinthethirdcolumn.Thisworksheetisusedtocheckthemathematicalaccuracyofabusiness’sbookkeeping.Thedebitsandcreditsinthetrialbalanceshouldincludeallbusinesstransactionsforthetimeperiodthetrialbalancecovers.Thetotalofthedebitsandthecreditsonthetrialbalanceshouldbeequal.Thiswillshowthattherearenomathematicalerrors,butothererrorsmayexistinyouraccountingsystem.WhatDoesaTrialBalanceRequire?Tocompleteatrialbalance,itisnecessarytoaccessthetransactionsinthegeneralledger.Thisinformationwillthenbeusedtocompletethetrialbalance.Thetrialbalancewillthenensurethateverytransactionhasbothadebitandacreditentry.Anyassetorexpenseaccountsshouldshowadebitbalance.Whereastheliabilities,revenue,andequityaccountsshouldhaveacreditbalance.HowtoPrepareaTrialBalanceThebusiness’snameislistedatthetopofthetrialbalance,aswellasthetitle,(Unadjusted)TrialBalance,andthedate.Thethreecolumnsfromlefttorightare:Accounts,Debits,andCredits.Theaccountswithdebitbalanceswillbelistedinthedebitcolumn,andtheaccountswithcreditbalanceswillbelistedinthecreditcolumn.Whenlistingtheaccounts,assetswillbelistedfirst,followedbyliabilities,equity,thenrevenue,andlasttheexpenses.Aftertheaccountsarelisted,thebalancesshouldbeplacedintheappropriatecolumn.Then,thetotalsshouldbefoundforthedebitandcreditcolumns.Thesetotalsshouldbeequal.Hereisasampleofwhatatrialbalancereportshouldlooklike:SampleCompany(Unadjusted)TrialBalanceMonthDay,YearAccountsDebitCreditCash$0AccountsReceivable$0AccountsPayable$0StockholdersEquity$0SalesRevenue$0SuppliesExpense$0Total$0$0UseofaTrialBalanceAtrialbalanceisthefirststeptowardpreparingacompany’sfinancialstatements.Thisisavaluableworksheetforaccountants,whichwillactasabasisforensuringtheaccuracyofaccountbalanceswhilecraftingfinancialstatements.Atrialbalanceensuresthatforeverydebitentry,thereisacorrespondingcreditentryrecordedinthebooks,whichisthebasisofdouble-entryaccounting.Bycheckingthis,ifanaccountantfindsthatthetrialbalancedoesnotagree,anydifferencescanbeinvestigatedandstraightenedoutpriortocraftingthefinancialstatements.Thiscanavoidthedifficultandoftencostlytaskoffixingamistakeafterthefinancialstatementshavebeencompleted.ExampleofaTrialBalanceSupposeacompanyhasacashaccountwithabalanceof$1,750,accountsreceivableof$250,accountspayableof$1,500,andstockholderequityof$500.Whenformingatrialbalance,allaccountswithadebitbalancewillbeaddedtogetherintheleftcolumn,andallaccountswithacreditbalancewillbeaddedtogetherintherightcolumn.Hereishowthiswouldlookwithourexamplecompany.ExampleCompany(Unadjusted)TrialBalanceJanuary31st,2021AccountsDebitCreditCash$1,750AccountsReceivable$250AccountsPayable$1,500StockholdersEquity$500Total$2,000$2,000Asyoucansee,thedebitandcreditaccountsbalanceeachother,whichisastrongsignthatouraccountshavebeenrecordedcorrectly.TrialBalance’sLimitationsAtrialbalanceisanextremelyusefulaccountingtool,butitdoeshaveseverallimitationstokeepinmind.Firstofall,atrialbalancewillonlyconfirmthatthetotalofallcreditbalancesmatchesthetotalofdebitbalances.Thereareactuallyseveralerrorsthatcanresultinthesumsofcreditsanddebitsagreeingdespitestillbeingincorrect.Similarly,acorrecttrialbalancedoesnotprovethatalltransactionshavebeenrecorded.Afterall,ifatransactionisnotrecordedoneitherthecreditordebitside,atrialbalancewillremainequivalentandthereforeappearcorrect.However,thebalancewillbeincorrectregardless,andothermeasurementswillhavetobeappliedtodetecttheerrors.Additionally,atrialbalancedoesservetoshowthatdebitandcreditbalancesareequal,andthishelpstoensurethatcorrespondingdebitandcreditentriesaremadeforeverytransaction.However,itcannotconfirmthattheseentriesweremadeinthecorrectaccounts,onlythattheyweremadeintobothacreditandadebitaccount.Ifanequalcreditanddebitbalanceareenteredinerror,whetheritistowrongaccountsorifincorrectlyenteredtransactionsoffseteachother,atrialbalancewillstillshowaperfectbalancebetweendebitsandcreditsandrequireothermethodstorevealerrors.ArticleSources&CitationsFundsNetrequiresContributors,WritersandAuthorstousePrimarySourcestosourceandcitetheirwork.TheseSourcesincludeWhitePapers,GovernmentInformation&Data,OriginalReportingandInterviewsfromIndustryExperts.ReputablePublishersarealsosourcedandcitedwhereappropriate.LearnmoreaboutthestandardswefollowinproducingAccurate,UnbiasedandResearchedContentinoureditorialpolicy.UMassLowell"VerifyingDataintheGeneralLedger:TrialBalance"Page1.November16,2021OpenLearn.edu"2.6Balancingoffaccountsandpreparingatrialbalance"Page1.November16,2021WesternWashingtonUniversity"TrialBalance"Page1.November16,2021EditorialProcessOurHighlyExperiencedTeamrecommendsProductsorServicesafterthoroughlyresearchingthemtoensureweprovideanunbiased,comprehensivesolutionforyourHomeorBusiness.WeStandbyourReviewsandwhenyouPurchasesomethingwe’veRecommended,thecommissionswereceivehelpsupportourStaffandourResearchProcess.