Trial Balance

 

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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, 2004. 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, 2004

	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.