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Recording Business Transactions

TRIAL BALANCE (Step 4)

The trial balance is a list of all accounts with their respective debit or credit balances. It
is prepared to verify the equality of debits and credits in the ledger at the end of each
accounting period or at any time the postings are updated.
The procedures in the preparation of a trial balance follow:
1. List the account titles in numerical order.

2. Obtain the account balance of each account from the ledger and enter the debit
balances in the debit column and the credit balances in the credit columh.

3 Add the debit and credit columns.

4. Compare the totals.

The trial balance is a control device that helps minimize accounting errors. When thee
totals are equal, the trial balance is in balance. This
equality provides an interim proof
of the accuracy of the records but it does not signify the absence of errors. For
example, if the bookkeeper failed to record payment of rent, the trial balance columns
are equal but in reality, the accounts are incorrect since rent expense is understated and
cash overstated.

The trial balance for the illustration followS:

Weddings "R" Us
Trial Balance
May 31, 2020

Cash P 22,200
Accounts Receivable 12,000
Supplies 18,000
Prepaid Rent 8,000
Prepaid Insurance 14,400
Service Vehicle 420,000
Office Equipment 60,000
Notes Payable P210,000
Accounts Payable 53,000
Utilities Payable 1,400
Unearned Referral Revenues 10,000
Besario, Capital 250,000
Besario, Withdrawals 14,000
Consulting Revenues 62,400
Salaries Expense 13,800
Utilities Expense 4,400
P586,800 P586,800