The Trial Balance - Cliffs Notes

After posting all transactions from an accounting period, accountants prepare a trial balance to verify that the total of all accounts with debit balances ... MyPreferences MyReadingList AccountingPrinciplesI ! Home StudyGuides AccountingPrinciplesI TheTrialBalance AllSubjects PrinciplesofAccounting TheAccountingEquation FinancialReportingObjectives GenerallyAcceptedAccountingPrinciples InternalControl IntroductiontoAccounting UnderstandingFinancialStatements AnalyzingandRecordingTransactions Double‐EntryBookkeeping JournalEntries TheGeneralLedger TheRecordingProcessIllustrated TheTrialBalance AnalyzingTransactions TAccounts AdjustmentsandFinancialStatements AccruedRevenues AccruedExpenses UnearnedRevenues PrepaidExpenses Depreciation AdjustingEntries TheAdjustmentProcessIllustrated FinancialStatements CompletionoftheAccountingCycle ClosingEntries ThePost‐ClosingTrialBalance TheAccountingCycle ReversingEntries CorrectingEntries TheWorkSheet AccountingforaMerchandisingCompany SalesDiscounts NetSales InventorySystems RecordingPurchases ReturnsandAllowances AccountingInventory PurchasesDiscounts RecordingSales SalesReturnsandAllowances NetPurchasesandGoodsPurchased TheCostofGoodsAvailableandSold GrossProfit FinancialStatementswithInventory AdjustingtheInventoryAccount InventoryAdjustments ClosingEntriesUpdatesInventory SubsidiaryLedgersandSpecialJournals SpecialJournals SubsidiaryLedgers Cash BankReconciliation CreditCardSales CashControls ThePettyCashFund Receivables EvaluatingAccountsReceivable EstimatingBadDebts—AllowanceMethod FactoringReceivables NotesReceivable RecordingNotesReceivableTransactions DiscountingNotesReceivable ReceivablesDefined Inventory InventorySystems:PerpetualorPeriodic InventorySubsidiaryLedgerAccounts CostFlowMethods InventoryErrorsandFinancialStatements EstimatingInventories DeterminingInventoryLevels TheCostofInventory TheValuationofMerchandise OperatingAssets DepreciationofOperatingAssets RepairsandImprovements DispositionofDepreciableAssets NaturalResources IntangibleAssets OperatingAssetsDefined TheCostofProperty,Plant,Equipment TheTrialBalance Afterpostingalltransactionsfromanaccountingperiod,accountantsprepareatrialbalancetoverifythatthetotalofallaccountswithdebitbalancesequalsthetotalofallaccountswithcreditbalances.Thetrialbalancelistseveryopengeneralledgeraccountbyaccountnumberandprovidesseparatedebitandcreditcolumnsforenteringaccountbalances.TheGreenerLandscapeGroup'strialbalanceforApril30,20X2appearsbelow. TheGreenerLandscapeGroupTrialBalanceApril30,20X2 Account Debit Credit 100 Cash $6,355 110 AccountsReceivable 150 140 Supplies 50 145 PrepaidInsurance 1,200 150 Equipment 3,000 155 Vehicles 15,000 200 AccountsPayable $50 250 UnearnedRevenue 270 280 NotesPayable 10,000 300 J.Green,Capital 15,000 350 J.Green,Drawing 50 400 LawnCuttingRevenue 750 500 WagesExpense 200 510 GasExpense 30 520 AdvertisingExpense 35 $26,070 $26,070 Althoughdollarsignsarenotusedinjournalsorledgeraccounts,trialbalancesgenerallyincludedollarsignsnexttothefirstfigureineachcolumnandnexttoeachcolumn'stotal.Trialbalancesusuallyincludeaccountsthathadactivityduringtheaccountingperiodbuthaveazerobalanceattheendoftheperiod. Anerrorhasoccurredwhentotaldebitsonatrialbalancedonotequaltotalcredits.Therearestandardtechniquesforuncoveringsomeoftheerrorsthatcauseunequaltrialbalances.Afterdouble‐checkingeachcolumn'stotaltomakesuretheproblemisnotsimplyanadditionerroronthetrialbalance,findthedifferencebetweenthedebitandcreditbalancetotals.Ifthenumber2dividesevenlyintothisdifference,lookforanaccountbalancethatequalshalfthedifferenceandthatincorrectlyappearsinthecolumnwiththelargertotal.IftheGreenerLandscapeGroup's$50accountspayablebalanceweremistakenlyputinthedebitcolumn,forexample,totaldebitswouldbe$100greaterthantotalcreditsonthetrialbalance. Ifthenumber9dividesevenlyintothedifferencebetweenthedebitandcreditbalancetotals,lookforatranspositionerrorinoneoftheaccountbalances.Forexample,supposethecashaccount'sbalanceof$6,355wereincorrectlyenteredonthetrialbalanceas$6,535.Thiswouldcausetotaldebitstobe$180greaterthantotalcreditsonthetrialbalance,anamountevenlydivisibleby9($180÷9=$20).Incidentally,thenumberofdigitsintheresultingquotient—thequotient20hastwodigits–alwaysindicatesthatthetranspositionerrorbeginsthisnumberofdigitsfromtherightsideofanaccountbalance.Also,thevalueoftheleftmostdigitinthequotient—2inthiscase—alwaysequalsthedifferencebetweenthetwotransposednumbers.Testthisbytransposinganytwoadjacentnumbersinthetrialbalanceandperformingthecalculationsyourself. Ifthedifferencebetweenthedebitandcreditbalancetotalsisnotdivisibleby2or9,lookforaledgeraccountwithabalancethatequalsthedifferenceandismissingfromthetrialbalance.Ofcourse,twoormoreerrorscancombinetorenderthesetechniquesineffective,andothertypesofmistakesfrequentlyoccur.Iftheerrorisnotapparent,returntotheledgerandrecalculateeachaccount'sbalance.Iftheerrorremains,returntothejournalandverifythateachtransactionispostedcorrectly. Someerrorsdonotcausethetrialbalance'scolumntotalstodisagree.Forexample,thecolumnsinatrialbalanceagreewhentransactionsarenotjournalizedorwhenjournalentriesarenotpostedtothegeneralledger.Similarly,recordingtransactionsinthewrongaccountsdoesnotleadtounequaltrialbalances.Anothercommonerroratrialbalancedoesnotcatchhappenswhenasingletransactionispostedtwice.Thetrialbalanceisausefultool,buteverytransactionmustbecarefullyanalyzed,journalized,andpostedtoensurethereliabilityandusefulnessofaccountingrecords. Previous TheRecordingProcessIllustrated Next AnalyzingTransactions TheAccountingEquation FinancialReportingObjectives GenerallyAcceptedAccountingPrinciples InternalControl IntroductiontoAccounting UnderstandingFinancialStatements Double‐EntryBookkeeping JournalEntries TheGeneralLedger TheRecordingProcessIllustrated TheTrialBalance AnalyzingTransactions TAccounts AccruedRevenues AccruedExpenses UnearnedRevenues PrepaidExpenses Depreciation AdjustingEntries TheAdjustmentProcessIllustrated FinancialStatements ClosingEntries ThePost‐ClosingTrialBalance TheAccountingCycle ReversingEntries CorrectingEntries TheWorkSheet SalesDiscounts NetSales InventorySystems RecordingPurchases ReturnsandAllowances AccountingInventory PurchasesDiscounts RecordingSales SalesReturnsandAllowances NetPurchasesandGoodsPurchased TheCostofGoodsAvailableandSold GrossProfit FinancialStatementswithInventory AdjustingtheInventoryAccount InventoryAdjustments ClosingEntriesUpdatesInventory SpecialJournals SubsidiaryLedgers BankReconciliation CreditCardSales CashControls ThePettyCashFund EvaluatingAccountsReceivable EstimatingBadDebts—AllowanceMethod FactoringReceivables NotesReceivable RecordingNotesReceivableTransactions DiscountingNotesReceivable ReceivablesDefined InventorySystems:PerpetualorPeriodic InventorySubsidiaryLedgerAccounts CostFlowMethods InventoryErrorsandFinancialStatements EstimatingInventories DeterminingInventoryLevels TheCostofInventory TheValuationofMerchandise DepreciationofOperatingAssets RepairsandImprovements DispositionofDepreciableAssets NaturalResources IntangibleAssets OperatingAssetsDefined TheCostofProperty,Plant,Equipment × BacktoTop AdamBede hasbeenaddedtoyour ReadingList! Ok Undo    ManageMyReadinglist × AdamBede hasbeenaddedtoyour ReadingList! Ok    ManageMyReadinglist × Removing#book# fromyourReadingListwillalsoremoveany bookmarkedpagesassociatedwiththistitle. Areyousureyouwanttoremove#bookConfirmation# andanycorrespondingbookmarks? Remove Cancel × LiteratureNotes TestPrep StudyGuides SignIn SignUp MyPreferences MyReadingList SignOut × × A18ACD436D5A3997E3DA2573E3FD792A