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# Section 3: Preparing a Trial

Balance
• Enduring Understandings:
• The trial balance is proof that total
debits = total credits in the ledger.
• To error is human.
• Essential Questions:
• How do you prepare a trial balance?
• How do you find and correct errors in
the trial balance?
Section 3: Preparing a Trial
Balance
• Objectives:
• Demonstrate how to prepare a trial
balance.
prior knowledge of the four steps and
the rules to debits and credits
transactions
Section 3: Preparing a Trial
Balance
• Objectives:
• Locate and identify journal entries that
are incorrect

## • Use proper accounting principles to

correct the wrong journal entries using
the three methods
What is the purpose of a Trial
Balance?

## • A formal way to prove the ledger.

• Fifth step in the accounting cycle
• After all journal entries have been
posted to the accounts in the general
ledger …….
What is the purpose of a Trial
Balance?
 Step 1 – ADD ALL Debit Balances
 Step 2 – ADD ALL Credit Balances
 Step 3 – COMPARE THE TWO TOTALS
 DO THEY EQUAL?????

##  This is called….PROVING THE LEDGER!

Try it yourselves….
Problem 7-6
 Step 1 – ADD ALL Debit Balances
 Step 2 – ADD ALL Credit Balances
 Step 3 – COMPARE THE TWO TOTALS
 DO THEY EQUAL?????
Correcting Entries

## “To err is human… but to really foul

things up, you need a computer”

## What does this quote mean to you?

How does it apply to accounting?
Mistakes Will Happen…

##  In accounting, if a mistake is made…there is

only 1 single rule that applies….
Making Correcting Entries
Depends…
 When the error is made

##  Where the error is made

3 Types of Errors you will See

posted)

##  Journal Entry is correct, however you made a

mistake while posting to the ledger

##  Error in a journal entry that has already been posted

(both journal and ledger are incorrect)
What is wrong with the following
example (error type 1)?

## If you discover an error before

posting!
Example: On January 1, Mrs. Nemec
invested \$52,000 to open up a business
called: “Nemec’s Accountants”

Post
Date Description Ref Debit Credit
Jan 1 Cash in Bank \$25,000
Mrs. Nemec, Capital \$25,000
Correcting in the Ledger, if
Journal Entry is correct
Balance
Post
Date Description Debit Credit
Ref Debit Credit

Jan 1 G1
\$25,000 \$25,000
when…..

## The journal entry has already been

posted, however the journal entry is
incorrect
Imagine the Following
Example:
 On February 15, Nemec’s Accountants paid
the monthly rent of \$1,500
Rent Expense Cash in Bank
Debit Credit Debit Credit

\$1,500 \$1,500
However the Journal Entry that
was recorded is…
Post
Date Description Ref Debit Credit
Feb 15 Advertising Expense 405 \$1,500
Cash in Bank 101 \$1,500

Balance
Post
Date Description Debit Credit
Ref Debit Credit

Jan 1 G1
\$20,000 \$20,000

Feb 15 G2
\$1,500 \$21,500
Acct Name: Rent Expense

Balance
Post
Date Description Debit Credit
Ref Debit Credit

## Jan 15 G1 \$2,000 \$2,000

Make a Correcting “Journal”
Entry First
Post
Date Description Ref Debit Credit
Feb 15 Rent Expense 401 \$1,500
“Journal” Entries

Balance
Post
Date Description Debit Credit
Ref Debit Credit

Jan 1 G1
\$20,000 \$20,000

Feb 15 G2
\$1,500 \$21,500

## Feb 15 Correcting G2 \$1,500 \$20,000

Entry
Acct Name: Rent Expense

Balance
Post
Date Description Debit Credit
Ref Debit Credit

## Feb 15 Correcting G2 \$1,500 \$3,500

Entry
Try it yourselves…

##  Check answers with me, then move on to

Problem 7.4 and 7.9 in your workbook
Problem 7.3 Solution

Post
Date Description Ref Debit Credit
May 10 Computer Equipment 120 \$1,500
Cash in Bank 101 \$1,500
Check 8099

## 20 Office Equipment 115 \$1,500

Computer Equipment 120 \$1,500
Memo 47
Account Name: Computer
Equipment
Balance
Post
Date Description Debit Credit
Ref Debit Credit

## May 1 Balance  \$3,000

10 G6 \$1,500 \$4,500

Correcting
20 G6 \$1,500 \$3,000
Entry
Account Name: Office
Equipment
Balance
Post
Date Description Debit Credit
Ref Debit Credit

May 1 Balance 
\$700

Correcting
20 G6 \$1,500 \$2,200
Entry