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Accounting > Trial Balance

Trial Balance

If the journal entries are error-free and were posted properly to the general ledger, the total of all of the debit balances should equal the total of all of the credit balances. If the debits do not equal the credits, then an error has occurred somewhere in the process. The total of the accounts on the debit and credit side is referred to as the trial balance.

To calculate the trial balance, first determine the balance of each general ledger account as shown in the following example:

General Ledger

Cash

Sep

1

7500

17

400

25

425

Bal. 6825

Expenses

Sep

15

1000

Sep

18

275

Bal. 1275

Once the account balances are known, the trial balance can be calculated as shown:

Trial Balance

Account Title

Debits

Credits

Cash

6825

Accounts Receivable

275

Parts Inventory

2225

Accounts Payable

2000

Capital

7500

Revenue

1100

Expenses

1275

10600

10600

In this example, the debits and credits balance. This result does not guarantee that there are no errors. For example, the trial balance would not catch the following types of errors:

  • Transactions that were not recorded in the journal
  • Transactions recorded in the wrong accounts
  • Transactions for which the debit and credit were transposed
  • Neglecting to post a journal entry to the ledger

If the trial balance is not in balance, then an error has been made somewhere in the accounting process. The following is listing of common errors that would result in an unbalanced trial balance; this listing can be used to assist in isolating the cause of the imbalance.

  • Summation error for the debits and credits of the trial balance
  • Error transferring the ledger account balances to the trial balance columns
    • Error in numeric value
    • Error in transferring a debit or credit to the proper column
    • Omission of an account
  • Error in the calculation of a ledger account balance
  • Error in posting a journal entry to the ledger
    • Error in numeric value
    • Error in posting a debit or credit to the proper column
  • Error in the journal entry
    • Error in a numeric value
    • Omission of part of a compound journal entry

The more often that the trial balance is calculated during the accounting cycle, the easier it is to isolate any errors; more frequent trial balance calculations narrow the time frame in which an error might have occurred, resulting in fewer transactions through which to search.

Accounting > Trial Balance

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