Finance (3.5) Prepare a Trail Balance

order of presentation in the trail balance

Assets Liabilities Stockholders' equity Revenues Expenses

Procedure trail balance

1. List the account titles and their balances. 2. Total the debit column and total the credit column. 3. Verify the equality of the two columns.

Trail balance includes

1.The trial balance proves the mathematical equality of debits and credits after posting 2.A trial balance may also uncover errors in journalizing and posting. 3. In addition, a trial balance is useful in the preparation of financial statement

limitations of a trail balance

A trial balance does not prove that all transactions have been recorded or that the ledger is correct. Numerous errors may exist even though the trial balance column totals agree. 1. a transaction is not journalized. (2) a correct journal entry is not posted. (3) a journal entry is posted twice (4) incorrect accounts are used in journalizing or posting. (5) offsetting errors are made in recording the amount of a transaction. In other words, as long as equal debits and credits are posted, even to the wrong account or in the wrong amount, the total debits will equal the total credits.

trail balance

a list of accounts and their balances at a given time.A trial balance proves that debits equal credits. A company usually prepares a trial balance at the end of an accounting period. The accounts are listed in the order in which they appear in the ledger. Debit balances are listed in the left column and credit balances in the right column. The totals of the two columns must be equal.

error

is the result of an unintentional mistake. It is neither ethical nor unethical.

irregularity

is an intentional misstatement, which is viewed as unethical.