12/30/2014

Howtopreparetrialbalance

Blog

How to prepare trial balance

The Trial Balance is, as the name suggests, a tab

out all our debit accounts and all our credit acco
balance or not.

A trial balance is important because it acts as a

our accounts. By looking at our trial balance we
see our bank balance, our loan balance, our ow
balance. In fact, we can immediately see the bal
single account in our business.

Why is this important?

Well, as you know, accounting is all about balancing. The accounting equation needs to balan
transaction needs to be balanced, our debits and credits need to be balanced and so on.

A trial balance is basically the accounting equation of our business laid out in detail. It has ou
and drawings on the left (the debit side) and our liabilities, revenue and owners equity on th
side). We can see everything clearly and make sure it all balances.

A trial balance that balances tells us that weve done all our journals and ledgers correctly. Ba
http://www.guru99.com/thetrialbalance.html

3/8

12/30/2014

Howtopreparetrialbalance

All your transactions for the year have been entered and everything looks right!

As you may have already guessed, in the real world trial balances do not always balance the
anything, human errors will occur and somewhere along the line someone is likely to have en
journal or processed a ledger incorrectly. Therefore at the trial balance stage accountants an
often forced to go back and review vouchers, journals and ledgers to locate the errors and br
back to balance. This shows the importance of producing a trial balance in the first place it
the accounting equation is out of balance and it needs to be fixed before going any further.

Producing the trial balance is the final step of data processing after that, we can start produ
statements!
So how is our trial balance prepared?

First of all, we take all the balances from our ledgers and enter them into our trial balance ta
the accounting equation:
DEBIT SIDE
Assets + Expenses + Drawings

CREDIT SIDE
Liabilities + Revenue + Owners Equity

Below is a list of all of our balances from our ledgers. You have calculated these balances in L
need to place them on the trial balance to see if they fit into the accounting equation!

http://www.guru99.com/thetrialbalance.html

4/8

12/30/2014

Howtopreparetrialbalance

Credit Side
Assets

Debit Side
Liabilities

Bank $21,650
Computer

Loan

$1,500

$9,000

Johns Car Shop

$3,00

Car $3,000

Accumulated depreciation

iPhone $500

Add your items here

Oven $2000

Add your items here

Expenses

Revenue
Cake mix $3,000

Sales $7,000

Interest expense $1,000

Add your items here

Telephone expense $300

Add your items here

Repairs expense $50

Add your items here

Depreciation $400

Add your items here

Drawings

Owners Equity
Drawings $1,000

http://www.guru99.com/thetrialbalance.html

Owners Equity

$15,0

5/8

12/30/2014

Howtopreparetrialbalance

CalculateTotalAssets

CalculateTotalExpenses

CalculateTotalDrawings

Total Balance

28650
4750
1000
34400

CalculateTotalLiabilities

CalculateTotalRevenue

CalculateTotalOwnersEquity

Total Balance

12400
7000
15000
34400

Wow. Youve just balanced your first trial balance. We now know that all our numbers are cor
compiling financial statements! Go take a break and celebrate with a bowl of fries and a choc
You deserve it!

< Prev
Like

Related Articles
http://www.guru99.com/thetrialbalance.html

6/8