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Howtopreparetrialbalance
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Well, as you know, accounting is all about balancing. The accounting equation needs to balan
transaction needs to be balanced, our debits and credits need to be balanced and so on.
A trial balance is basically the accounting equation of our business laid out in detail. It has ou
and drawings on the left (the debit side) and our liabilities, revenue and owners equity on th
side). We can see everything clearly and make sure it all balances.
A trial balance that balances tells us that weve done all our journals and ledgers correctly. Ba
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All your transactions for the year have been entered and everything looks right!
As you may have already guessed, in the real world trial balances do not always balance the
anything, human errors will occur and somewhere along the line someone is likely to have en
journal or processed a ledger incorrectly. Therefore at the trial balance stage accountants an
often forced to go back and review vouchers, journals and ledgers to locate the errors and br
back to balance. This shows the importance of producing a trial balance in the first place it
the accounting equation is out of balance and it needs to be fixed before going any further.
Producing the trial balance is the final step of data processing after that, we can start produ
statements!
So how is our trial balance prepared?
First of all, we take all the balances from our ledgers and enter them into our trial balance ta
the accounting equation:
DEBIT SIDE
Assets + Expenses + Drawings
CREDIT SIDE
Liabilities + Revenue + Owners Equity
Below is a list of all of our balances from our ledgers. You have calculated these balances in L
need to place them on the trial balance to see if they fit into the accounting equation!
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Credit Side
Assets
Debit Side
Liabilities
Bank $21,650
Computer
Loan
$1,500
$9,000
$3,00
Car $3,000
Accumulated depreciation
iPhone $500
Oven $2000
Expenses
Revenue
Cake mix $3,000
Sales $7,000
Depreciation $400
Drawings
Owners Equity
Drawings $1,000
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Owners Equity
$15,0
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CalculateTotalAssets
CalculateTotalExpenses
CalculateTotalDrawings
Total Balance
28650
4750
1000
34400
CalculateTotalLiabilities
CalculateTotalRevenue
CalculateTotalOwnersEquity
Total Balance
12400
7000
15000
34400
Wow. Youve just balanced your first trial balance. We now know that all our numbers are cor
compiling financial statements! Go take a break and celebrate with a bowl of fries and a choc
You deserve it!
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