Trial Balance

The trial balance is a worksheet on which you list all your general ledger accounts and their debit or credit balance. It is a tool that is used to alert you to errors in your books. The total debits must equal the total credits. If they don't equal, you know you have an error that must be tracked down.

When closing out your books at the end of an accounting period, you will prepare three trial balances:

1. A preliminary trial balance is prepared using your general ledger account balances before you make adjusting entries.
2. An adjusted trial balance is done after preparing adjusting entries and posting them to your general ledger. This will help ensure that the books used to prepare your financial statements are in balance.
3. A post-closing trial balance is done after preparing and posting your closing entries. This trial balance, which should contain only balance sheet accounts, will help guarantee that your books are in balance for the beginning of the new accounting period.

You are getting ready to close the books for the year ended December 31, 20xx. You post totals from the journals to the general ledger, and foot the general ledger accounts. Then you prepare the following preliminary trial balance, using the balances from your general ledger accounts. Beta Service Company Preliminary Trial Balance December 31, 20xx Debit Credit Cash in bank 3,423 Accounts receivable 11,400 Equipment 42,900 Accumulated depr. equip. 29,500 Buildings 119,000 Accumulated depreciation building 17,950 Land 80,000 Accounts payable 2,213 Payroll taxes payable 2,567 Mortgage payable 135,812 Capital 59,823 Drawing account 24,000 Sales 332,462 Advertising 18,900 Depreciation 16,760 Insurance 4,500 Interest expense 12,421 Payroll taxes 16,233 Property taxes 4,989 Repairs and maintenance 23,430 Utilities 3,856 Wages 198,515 580,327 580,327

A trial balance spreadsheet can be found in the Business Tools area. It is an Excel 4.0 spreadsheet template, so you can use the template as a starting point for your own trial balance.

What if your trial balance does not balance? In other words, what if total debits don't equal total credits? This shouldn't surprise or discourage you. In fact, it might be more surprising if it does balance. Accounting errors happen. Even experienced bookkeepers normally have to find trial balance errors.