By Myrna Kopeechuk

Intended AudienceIntended Audience

Adult Learners who are:Adult Learners who are: Students of Basic Accounting Theory Course Students of Basic Accounting Theory Course

at the University College of the North.at the University College of the North. Small business owners preparing financial Small business owners preparing financial

statements for their business.statements for their business. Individuals keeping track of their personal Individuals keeping track of their personal

spending.spending.

What is a Trial Balance?What is a Trial Balance?

A Trial Balance is a list of the balance A Trial Balance is a list of the balance of each General Ledger account. of each General Ledger account. The balances are totaled to confirm that The balances are totaled to confirm that

the total debits equal the total credits. the total debits equal the total credits. A Trial Balance is completed at the A Trial Balance is completed at the

end of a fiscal period.end of a fiscal period.

Why is a Trial Balance Why is a Trial Balance used?used?

To prove the equality of the total debits To prove the equality of the total debits and credits in the General Ledgerand credits in the General Ledger

To provide a listing of all the account To provide a listing of all the account balances in the General Ledgerbalances in the General Ledger

To provide a basis for the preparation of To provide a basis for the preparation of financial statements (Income Statement financial statements (Income Statement and Balance Sheet)and Balance Sheet)

The Trial Balance is the 4The Trial Balance is the 4thth step of the Accounting Cyclestep of the Accounting Cycle

An Example of a Trial An Example of a Trial BalanceBalance

Carter’s Window Covering Trial Balance June 30, 2004

Account Debit Credit Bank 17355.00

Office Equipment 5000.00

Land 25000.000

Building 50000.00

Mortgage Payable 20000.00

T. Carter, Capital 80000.00

Sales 5500.00

Purchases 8000.00

Telephone Expense 145.00

105500.00 105500.00

Preparing a Trial BalancePreparing a Trial Balance

Step OneStep One Write the Trial Balance heading at the Write the Trial Balance heading at the

toptop The heading consists of 3 lines The heading consists of 3 lines

The name of the businessThe name of the business The words “Trial Balance”The words “Trial Balance” The dateThe date

Preparing a Trial BalancePreparing a Trial Balance

Step 2Step 2 Enter the following for each General Enter the following for each General

Ledger account.Ledger account. The account nameThe account name The balanceThe balance

If the balance is a debit, enter in the left columnIf the balance is a debit, enter in the left column If the balance is a credit, enter in the right columnIf the balance is a credit, enter in the right column

Preparing a Trial BalancePreparing a Trial Balance Step 3Step 3

Draw a single line under each amount Draw a single line under each amount column to indicate that the columns will column to indicate that the columns will be addedbe added

Step 4Step 4 Add each amount column. Write the totals Add each amount column. Write the totals

on the first line under the single ruling.on the first line under the single ruling. Step 5Step 5

Indicate that the Trial Balance is correct Indicate that the Trial Balance is correct by drawing a double line under the totals.by drawing a double line under the totals.

How to Check for ErrorsHow to Check for Errors

Step Problem Things to Do

1 If totals are not correct Check addition

2 Find the difference of the two columns Look for the amount of the difference

3 Divide the difference by 2 Check in the ledger for the amount (if the difference is divisible by 2, an amount may have been listed on the wrong side)

4 Divide the difference by 9 Check figures (if the difference is divisible by 9, figures may have been transposed)

5 Compare balances on the Trial Balance with ledger accounts

Figures may have been entered incorrectly

A Trial Balance is A Trial Balance is complete when the complete when the debit column debit column balances with the balances with the credit column. Both credit column. Both sides must be equal.sides must be equal.

Created for the students of Created for the students of

Basic Accounting TheoryBasic Accounting Theory

KC MGT 1200KC MGT 1200