The Source and Structure of Trial Balance
3.1 Trial balance
3.1.1 The source and structure of trial balance
A trial balance is a list with two columns, which are debit and credit. It is important to every company that they need to check the errors that maybe made during enter the transactions into general accounts. If the principles of the double entry have been correctly applied to the recording of transactions in ledger accounts, the total of debit balances will equal to the total of credit balances. So the total of the debit column should be equal to the total of credit column in the trial balance.
The functions of trial balance are first to detect errors made in the recording of transactions by comparing the totals of debit and credit columns. And second is to be a basis for preparation of the financial statements at the end of accounting period.
How the steps go?
After finish entering all the transactions to all the general accounts, it is time to start preparing a trial balance to detect the errors and get prepared to make financial statements. Step 1 – Extract the closing balances of ledger accounts
In every general ledger account, there always will have a balance figure that is going to be brought down to next month then we can take the figure to the trial balance. To all the debits in the account, we should find the left side of the account. To all the credits in the account, we should find the total of the right side of the account. If the debit and credit sides of an account are equal, the account has a zero balance.
Example:
The closing balance of cash account in 2012 is 743,000, which is the figure color in red. So, first we need to extract this figure, which is called the closing balance, to the trial balance. Also, since the closing balance is a debit balance, so we are going to post the figure in the debit column, which is the left side of the trial balance.
Step 2 – Recording the balances with their account titles
This step is to record and list all the debit balances into debit
3.1.1 The source and structure of trial balance
A trial balance is a list with two columns, which are debit and credit. It is important to every company that they need to check the errors that maybe made during enter the transactions into general accounts. If the principles of the double entry have been correctly applied to the recording of transactions in ledger accounts, the total of debit balances will equal to the total of credit balances. So the total of the debit column should be equal to the total of credit column in the trial balance.
The functions of trial balance are first to detect errors made in the recording of transactions by comparing the totals of debit and credit columns. And second is to be a basis for preparation of the financial statements at the end of accounting period.
How the steps go?
After finish entering all the transactions to all the general accounts, it is time to start preparing a trial balance to detect the errors and get prepared to make financial statements. Step 1 – Extract the closing balances of ledger accounts
In every general ledger account, there always will have a balance figure that is going to be brought down to next month then we can take the figure to the trial balance. To all the debits in the account, we should find the left side of the account. To all the credits in the account, we should find the total of the right side of the account. If the debit and credit sides of an account are equal, the account has a zero balance.
Example:
The closing balance of cash account in 2012 is 743,000, which is the figure color in red. So, first we need to extract this figure, which is called the closing balance, to the trial balance. Also, since the closing balance is a debit balance, so we are going to post the figure in the debit column, which is the left side of the trial balance.
Step 2 – Recording the balances with their account titles
This step is to record and list all the debit balances into debit