How to Prepare Trial Balance with Example

The TRIAL BALANCE Explained (Full Example!)

Learn how to prepare a Trial Balance using T Accounts and Journal Entries.  The Trial Balance is made easy in this episode of Accounting Stuff - Accounting Basics for Beginners Lesson 5 - you will learn:

A Trial Balance, or “TB” when abbreviated, is an Accounting Report showing the Closing Balances of all General Ledger accounts at a point in time.

Back in the days of Accounting on paper, it was used to check that the Debit and Credit column totals match each other. However, since the introduction of Accounting Software check has become less and less important since it's now done automatically.

• What is a Trial Balance in Accounting?  I explain its definition and structure as part of Basic Accounting for Beginners.

• Then I explain the purpose of a Trial Balance in Accounting, what a Trial Balance is used for, and why it was originally created.

• After that, I'll give you five reasons why a balanced Trial Balance sheet isn't necessarily error-free.

• Finally, I'll show you how to prepare a Trial Balance sheet from both Journal Entries and T Accounts.  We will work through six Trial Balance examples and solutions.

Nowadays, it is an Internal Document that is typically used by Accountants to check for errors and assist in the production of Financial Statements. It is also used by Auditors in deciding which accounts to review.

OK, so now we know what a Trial Balance means, but what does it look like?

It looks like this… We have a complete listing of all General Ledger accounts running down the page, with two columns for the Debit and Credit totals.

In the title, we need to mention the period end date since we're looking at a snapshot at a point in time. The account names are grouped by their type, typically we start off with Assets, Liabilities, Equity, and Dividends since this is the typical layout of a Balance Sheet.

How to Prepare a Trial Balance Accounting Principles

how to prepare a trial balance. A trial balance is a list of closing balances of ledger accounts on a certain date and is the first step toward the preparation of financial statements.

 A trial balance is prepared to check the mathematical equality of accounting under the double-entry system. This equality occurs when the sum of the debit account balances equals the sum of the credit account balances. To prepare a trial balance, all ledger accounts are closed at the end of an accounting period or when a trial balance is intended to be prepared.

A trial balance has three columns, a column for account names, a debit column, and a credit column. Ledger balances are posted into the trial balance depending on the nature of the accounts. Assets, expenses, and drawings.

 Accounts are recorded in the debit column as they have a normal debit balance. In contrast, liability accounts, equity accounts, and revenue accounts are recorded in the credit column as they have a normal credit balance.

A trial balance only confirms that the total of all debit balances equals the total of all credit balances. Debit and credit totals may agree despite errors. If they do not agree, the differences must be investigated and resolved before financial statements are prepared. Let us now look at an illustration to see how to prepare a trial balance. 

Trial balance explained

What is a trial balance, and how does a trial balance work? Let me show you an example of what a trial balance looks like, and explain why a trial balance is a useful accounting tool that has already been in use for centuries!

A trial balance allows you to check for mathematical errors (is the sum of the debits equal to the sum of the credits), and check account balances versus expectations (if you usually have a balance of around $100,000 in Accounts Receivable, and now you have $10 million, you want to check the journal entries making up that balance).

Let’s start off by identifying how trial balances fit into the accounting process.

• The first step is to identify the transactions that need to be recorded.

• You then record the journal entries.

• And prepare T-accounts.

• The trial balance is the next step, right in between preparing the T-accounts.

• And preparing the financial statements.

How to Prepare a Trial Balance (Step by Step)

I will show you how to prepare a trial balance step by step. In the accounting cycle, you must follow the exact steps to prepare a trial balance. In this video, I will show you step by step from journalizing all the way to preparing a trial balance. First, we discuss what a trial balance is then we prepare a trial balance in Excel using real numbers.

Talk about what the trial balance is then we go through a huge example from journalizing all the way to preparing a trial balance from scratch.

so first off where does the trial balance actually go in the accounting cycle as you might have known already there are 10 steps in the accounting cycle here from all the way to analyzing transactions to creating and posting reversing entries.

it's a listing of the ledger accounts and their debit or credit balances to determine that debits equal credits in the recording process. now this is very very important here so we must talk about this the debits have to equal credits debits must equal credits.

so your balances have to add up at the end very important to know that because if they don't add up there was an error inside of this process up here when we went through preparing the journal entries.

How to Prepare Trial Balance from Ledger Account

How to prepare a Trial Balance from a Ledger account. i.e. Step by step procedure from Journal Entry to Ledger account and Ledger account to Trial Balance.

what does a trial balance Let us first understand trial balance will show you the position of each and every ledger account on a particular day. so what do you mean by position means the trial balance will tell you the balance of each and every ledger account as on a particular data.

so the difference between the ledger account and trial balances the ledger account is prepared for a particular period but the trial balance will be prepared as of one day.

FAQs Related Questions & Answers :)

 1. What is Accounting? Significance, Purpose, and Need

Introduction to Accounting. | What is accounting?
Accounting is a useful way of recording and summarizing financial information. Businesses use accounting to keep their financial information organized which helps them in making sense of their financial data and also keeps them compliant with financial regulations. Learn More. 

 2. What are Assets and Liabilities in Accounting? | Definition and Example

A House An Asset Or A Liability? [ Finally Explained ]
Is a house an asset or a liability? That is one of the biggest questions many people have when they think about buying a house.
It is important to understand real estate in terms of assets and liabilities and the different ways you can buy a house so you will no longer wonder Should I buy a house? Learn more.

 3. What is Accounting Equation? | Example Problems

What is The Accounting Equation?
It is a basic but also a very important accounting principle, so what is the accounting equation? LEARN MORE.
so what is the accounting equation? I’m Thomas Harwood and Welcome to The Accounting Student, where we create free and short videos Learn more.

 4. what is revenue, expense & drawing in accounting?

What is Revenue Expenditure? | ACCOUNTING
A company will have different types of expenditure, how will revenue expenditure be treated in the accounts?
what is revenue expenditure? Usually, a business will have cash coming in, which can be known as income, and cash going out which can be referred to as expenditure. Learn more.

 5. Expanded Accounting equation? with examples

Accounting Equation
The accounting equation is one of the fundamental elements of double-entry accounting and the foundation for all of the concepts learned in introductory accounting. In this short video, you will learn what the equation is and what each part represents.
This video was created about the Utah State CTE standards for the Accounting I High School course. Specifically, this video prepares students to complete Strand 2, Standard 2: Demonstrate an understanding of the fundamental accounting equation. Learn more.

 6. Basic Accounting Transaction with EXAMPLES

Accounting Process for Transaction Analysis - WorldWide Webster
On the accounting process, you'll recall from class the accounting process has three major steps. Learn more.

 7. How to Make Journal Entries in Accounting [Examples]

Journal Definition - What is a Journal?
The Journal definition includes a breakdown of areas in the definition. Analyzing the definition of key terms often provides more insight into concepts.
The term journal can be defined as a Record in which transactions are entered before they are posted to ledger accounts; also called the book or original journal. Learn more.

 8. How to Make a Ledger Account [Examples]

What is a General Ledger? (Recording Nonprofit Transactions)
What is a general ledger? A general ledger is a list of transactions by account. In this lesson, you’ll learn what transactions are, how and when to record them, and how they impact your nonprofit's accounting system. Learn more.

 9. What is Accounting Equation?

Depreciation explained
What is depreciation? How to calculate depreciation? Depreciation, amortization, and CapEx tutorial.
Overview of depreciation accounting (concept and application), and related topics such as accumulated depreciation, book value, residual value, historical cost, fixed assets, amortization, useful life, capital expenditures (CapEx), and capitalization. Intended for students and business people at both entry and advanced levels. Learn more.

 10. How to Prepare Trial Balance with Example

The TRIAL BALANCE Explained (Full Example!)
Learn how to prepare a Trial Balance using T Accounts and Journal Entries. The Trial Balance is made easy in this episode of Accounting Stuff - Accounting Basics for Beginners Lesson 5 - you will learn: Learn more.