The Trial Balance

Last Week
We went through
Debits and Credits

Talked about the steps in recording transactions

Recognize the MIN two accounts affected Do they go up or down? By how much? Do we debit or credit?

Opening the Ledger

Calculating New Balances in the Accounts

At any given time, an accountant needs to know how much money is in each account
Especially after many transactions have taken place

Example:
Yesterdays homework your cash account was touched several times

Calculating New Balances in the Accounts

For any given account when we are done with transactions we will:
Add the Debit side Add the Credit side Subtract the smaller amount from the larger Place the answer on the larger side of the account

Calculating New Balances in the Accounts

Cash $2500 $200 $45 $2700 BALANCE: $2155 $545 $500

Trial Balance
In order to know if the account has recorded all the transactions correctly
We must know if debits = credits

Trial Balance
A list of the ledger account balances. (T-Accounts) The total of the debit balances should equal the total of the credit balances. Balance indicates mathematical accuracy

Trial Balance
The Trial Balance is a financial statement
Therefore, we need to prepare it in a formal manner Title
Similar three lines to B/S & I/S WHO? PTs Pizza WHAT? Trial Balance WHEN? December 31, 2011

Accounts are listed in the order they appear in the ledger

Assets, Liabilities, Owners Equity, Revenue & Expenses Usually the same order as they would appear on the B/S and I/S

Trial Balance

Cash $25000 $300

$3500
$2,100 BALANCE: $26,300

BALANCED!!

Limitations of the Trial Balance

Will not find an error if the wrong account was chosen
Example: Debit furniture rather than equipment

Will not find if the account mixed up debits and credits for one account
Example: Paid money owing $500
Debit Cash $500 & Credit A/P $500

Preparing the New Balance Sheet

After a Trial Balance is recorded & the accountant is confident in their transaction records
Post the new totals to a balance sheet

Homework
Page 57-58 in textbook
Q #11, 12, 13