Trial Balance Accounting

A trial balance, sometimes abbreviated to TB, is a list of all the account balances in the accounting records on a particular date. The trial balance is used to check the arithmetic accuracy and correctness of the bookkeeping entries.

Under the method for every debit there should be a credit so a list of all the balances in the accounting records should balance.

Until a trial balance balances you cannot start the preparation of the Financial Statements. It is important to realize that although a trial balance may in fact balance, there may still be errors in the accounting records.

How do you Prepare a Trial Balance?

There are two main methods of preparing a trial balance

  1. Using Totals – in this method the totals of the debit side of the account are entered in the debit side of the trial balance, and the totals of the credit side of the account are entered into the credit side of the Trial Balance.
  2. Using Balances – the more usual method is that each individual account is totalled to give a net debit or credit balance on the account, the balance is then entered on the debit or credit side of the trial balance as appropriate.
Example trial balance using balances method
Account Debit Credit
Accounts receivable 4,000
Inventory 2,000
Cash 1,500
Accounts payable 2,000
Capital 3,000
Revenue 5,000
Purchases 2,500
Total 10,000 10,000

The two columns should be equal or there is an error in the accounting records or the TB preparation.

Why do you need a TB?

The TB is not part of the accounting records, it is extracted from the records as part of the accounting cycle to be used as the starting point for the production of the Financial Statements. It is a basic check to ensure that your accounting records balance, that the accounting equation has been satisfied, and that every debit had a corresponding credit. If the TB does not balance, assuming it has been prepared properly, it means there is an error in the accounting records.

The balancing of the TB does not however mean that the accounting records are correct, it simply means that for every debit there was a corresponding credit. It does not tell you that the debits and credits are correct or whether both sides of an entry have been completely missed out of the accounting records.

Trial Balance Accounting February 15th, 2017Team

You May Also Like

Related pages

purchase price variance accountingconsignee consignorsample of petty cash bookaccounting worksheet excel templatewhat is debtors control accountentry for allowance for doubtful accountspayback period advantagesjournal entry unrealized gainexample payroll journal entrycalculate depreciation straight lineformat of adjusted cash booktreasury stock journal entrydeferred tax computationamortization schedules in excelprepaid insurance journal entry exampleaccounting journal entry cheat sheetbookkeeping debits and creditscontribution margin meaningcalculate depreciation expense straight line methodtrial balance to balance sheet examplecalculating receivables turnovercash and equivalents turnoverjournal entry for withholding taxpercentage of completion accounting journal entriesexcel npv calculationaccrual accounting basicspaid rent for the month journal entrydouble entry for accrualscash replenishmenthow to compute straight line depreciationdisbursement voucher templateallowance method write offsample of debit and credit entrypay back period calculationannuity npvgoodwill impairment entrylabor rate variance examplesales ledger account formattill reconciliation sheetaccounting basics journal entriesaccounts payables journal entriesdiscount excel formulazero based budgeting disadvantagesverifiability principle accountingcash discount journal entrypetty cash voucher meaningconverting from accrual to cash basiscvp formulastandard costing variancesexample of chart of accounts in general ledgergrant amortisationcalculate the degree of operating leveragebookkeeping in excelcalculate effective annual interest ratedebt equity ratio significancefuture value of annuity due calculatorpost closing trail balancefv excel formulawhats gross profitexcel double entry bookkeeping templateworking out gross profit marginbills receivable meansrental ledger templatepercentage completion method of accountingwarranty expense journal entrydefine capacity cushionasset liability equationunearned service revenue journal entrycalculate receivable daysjob costing sheettreatment of suspense accountpayment voucher template pdfwhen is a trial balance preparedcapitalized interest journal entrybonds payable journal entrycurrent assets debtorsjournal entry for bills receivablepurpose of statement of retained earningsadjusting entry for supplies on hand