Trial Balance
Trial Balance
During the month, you record transactions in accounts.
![t1.4](https://seeaccountingnow.online/wp-content/uploads/2022/04/t1.4.jpg)
Each transaction will actually appear in two accounts
![t2.5](https://seeaccountingnow.online/wp-content/uploads/2022/04/t2.5.jpg)
One side of the transaction will appear in a general account, such as a sales account
![t3.1](https://seeaccountingnow.online/wp-content/uploads/2022/04/t3.1.jpg)
And a duplicate record of the transaction will appear in either the cash account or one of two control accounts
![t4.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t4.2.jpg)
This means that a record of each & every transactions will appear in the cash account or a control account
![t5.3](https://seeaccountingnow.online/wp-content/uploads/2022/04/t5.3.jpg)
If, after checking, the transactions in these accounts prove to be correct, then the duplicate transactions shown in the other accounts should be correct, as well.
![t6.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t6.2.jpg)
With computerized accounting, this will always be the case.
![t9.1](https://seeaccountingnow.online/wp-content/uploads/2022/04/t9.1.jpg)
For every credit entry, the computer will ensure there is a corresponding debit entry.
![t10.1](https://seeaccountingnow.online/wp-content/uploads/2022/04/t10.1.jpg)
This was not the case in the days of manual accounting, though.
![t11.1](https://seeaccountingnow.online/wp-content/uploads/2022/04/t11.1.jpg)
The transaction shown in the control account may have been correct.
![t12.1](https://seeaccountingnow.online/wp-content/uploads/2022/04/t12.1.jpg)
But there was no guarantee the other side was actually a duplicate of that transaction.
![t13.1](https://seeaccountingnow.online/wp-content/uploads/2022/04/t13.1.jpg)
To make sure there were no such errors, you prepared a trial balance.
![t14](https://seeaccountingnow.online/wp-content/uploads/2022/04/t14.jpg)
A trial balance lists the balance of every account in the general ledger.
![t15.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t15.2.jpg)
This list is divided into accounts that have a credit balance and those that have a debit balance.
![t16.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t16.2.jpg)
The purpose of the two lists is so you can make sure total credits equals total debits.
![t17.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t17.2.jpg)
The reason you do this is because for every debit entry, there should be a corresponding credit entry.
![t18.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t18.2.jpg)
So total debits should equal total credits
![t19.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t19.2.jpg)
If this proves to be the case, then it means all of your entries were correct.
![t20.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t20.2.jpg)
However, when recording transactions manually, it was easy to make a mistake.
![t21.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t21.2.jpg)
Had you made a mistake, then total debits would not equal total credits.
![t22.1](https://seeaccountingnow.online/wp-content/uploads/2022/04/t22.1.jpg)
This meant your trial balance wouldn’t balance.
![t23.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t23.2.jpg)
Should this be the case, you needed to go through your records to find and correct the error.
![t24.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t24.2.jpg)
How the Trial Balance is Used Today
With computerized accounting, the trial balance is no longer as necessary as it once was.
![t25](https://seeaccountingnow.online/wp-content/uploads/2022/04/t25.jpg)
However, errors are still possible.
![t26](https://seeaccountingnow.online/wp-content/uploads/2022/04/t26.jpg)
For example, you may record a transaction in the postage account.
![t27](https://seeaccountingnow.online/wp-content/uploads/2022/04/t27.jpg)
When it should have been recorded in the purchases account.
![t28](https://seeaccountingnow.online/wp-content/uploads/2022/04/t28.jpg)
In this case, the control accounts will still be correct.
![t29](https://seeaccountingnow.online/wp-content/uploads/2022/04/t29.jpg)
The system will also balance.
![t30](https://seeaccountingnow.online/wp-content/uploads/2022/04/t30.jpg)
Yet there is still an error in your records.
![t31](https://seeaccountingnow.online/wp-content/uploads/2022/04/t31.jpg)
The only way to find this type of error is to run your eye over the trial balance and try to spot any kind of abnormality in the records
![t32](https://seeaccountingnow.online/wp-content/uploads/2022/04/t32.jpg)
How to Prepare a Trial Balance
All the accounts in your accounting system form what is known as the general ledger
![t33](https://seeaccountingnow.online/wp-content/uploads/2022/04/t33.jpg)
Each account has a balance.
![t34](https://seeaccountingnow.online/wp-content/uploads/2022/04/t34.jpg)
Some accounts balance on the credit side.
![t35](https://seeaccountingnow.online/wp-content/uploads/2022/04/t35.jpg)
Others balance on the debit side.
![t36](https://seeaccountingnow.online/wp-content/uploads/2022/04/t36.jpg)
You need to find e balance of each account.
![t37](https://seeaccountingnow.online/wp-content/uploads/2022/04/t37.jpg)
Then list these balances in a trial balance—in either a debit column or a credit column.
![t382](https://seeaccountingnow.online/wp-content/uploads/2022/04/t382.jpg)
When doing this, you begin with asset accounts.
![t39.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t39.2.jpg)
Then you record liability accounts.
![t40.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t40.2.jpg)
Then equity accounts
![t41.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t41.2.jpg)
income accounts
![t42.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t42.2.jpg)
and finally, expense accounts
![t43.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t43.2.jpg)
Once complete, you find the total of each column
![t44.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t44.2.jpg)
If equal, it shows trial balance is balanced.
![t45.2](https://seeaccountingnow.online/wp-content/uploads/2022/04/t45.2.jpg)