Preparing a Trial Balance

Posted by Professor Cram in Accounting Cycle

Preparing the Trial Balance

Preparing the trial balance is the process of totaling the debits and credits in your chart of accounts, then making sure that the sum of all debits equals the sum of all credits — that the two amounts balance. The trial balance is a vital step in the accounting cycle, being the first step in the "end of accounting period" process.

Steps to Prepare the Trial Balance

Here are the steps you will undertake to prepare the trial balance:

  • For each ledger account — Cash, Accounts Payable, etc. — total your credits and debits.
    • If the credit total is larger, subtract the debit total from the credit total to get your ledger account total which goes in the credit column of the trial balance
    • If the debit total is larger, subtract the credit total from the debit total to get your ledger account total which goes in the debit column of the trial balance
    • Put the ledger account total in the credit or debit column of your trial balance (as identified above).
  • When you have debit or credit totals for each ledger account, add all of your credit totals to get a credit grand total.
  • Add all of your debit totals to get a debit grand total. This is your trial balance.

Unbalanced Trial Balance

If you have an unbalanced trial balance, then you have an error somewhere in the accounting process. Examples of problems that can unbalance a trial balance include:

  • Adding the debits and credits for the trial balance incorrectly;
  • Forgetting to include a ledger account balance on the trial balance;
  • Putting the ledger account balances in the wrong debit/credit column in the trial balance;
  • Writing the wrong ledger account balances in the trial balance columns;
  • Miscalculating the ledger account totals;
  • Posting a journal entry incorrectly to the general ledger, whether using the wrong number or getting your debits/credits mixed up;
  • Making an error in your journal entry, whether using the wrong number or forgetting part of a compound journal entry.

In order to proceed, you'll need to figure out why the trial balance is unbalanced and fix it. (Read more about balancing an unbalanced trial balance.)

Balanced Trial Balance

If all of your journal entries were posted properly (and error-free) in the general ledger, your debit grand total and credit grand total should balance, and you can move on in the accounting cycle. If the debit and credit grand totals do not balance, then you have an error to find somewhere in your transaction posting process (journal to general ledger to trial balance).

It's possible to have a posting error even if the debits and credits do balance, but that will get found and solved later in the accounting cycle. Examples of problems that would not show up in the trial balance include:

  • Putting the credit amount in the debit column and the debit amount in the credit column for a particular transaction;
  • Recording a transaction in an incorrect account;
  • Forgetting to record a journal entry as a general ledger transaction;
  • Neglecting to make a journal entry at all.

Preparing a trial balance more frequently means that you have fewer transactions to go through, so if there is an error you can (usually) find it more easily. Once you have a balanced trial balance, you can proceed to adjusting entries, the next step in the accounting cycle. Remember, though, you don't have to wait until the end of the accounting period to prepare a trial balance!

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Comments

21 Responses to “Preparing a Trial Balance”

  1. Sher khan says:

    Hello!
    I need a Sample Trail Balance for small Manuafacter.
    Can you Help you me?
    Thanks

  2. opolot justin says:

    Dont you think poor completion of the double entry is another reason the trial balance not to balance?

  3. Tusiime osward says:

    i would like to know the errors that may bring the trial balance not to balance

  4. Professor Cram says:

    Tusiime, check out Balancing an Unbalanced Trial Balance for suggestions on how to do that.

  5. v.vennela says:

    how to preparing trial balance please help to me

  6. ajak mathac says:

    how to prepare trial balances
    give an example.

  7. sameer says:

    I need a Sample Trail Balance for small Manuafacter.
    Can you Help you me?
    Thanks

  8. OKAFOR EBUKA says:

    if you can give me more information on how to prepare a balance sheet

  9. shahzore chandio says:

    how to understand debit and credit? and how to make ledger posts and trial balance?

  10. sarfraz says:

    what is first step to preparing trial balance?then what is the use of trail balance.

  11. k.sai.priya says:

    how.to.make.the. transactional.in..

  12. unknown says:

    I dont understand why totals for debits and credits must balance.Where is the basis for all this?The amounts are different altogether.

  13. Venkatesh.K says:

    I need some excercise Problems to Learn how to prepare P&L Trail Balance & Balance Sheets,

    Do the needfull.

    Thanks

    Venkatesh.K

  14. saji says:

    how i know the status of the company (means what is the total liability, is it profit or not & status of the company)please advise me

  15. kofi says:

    need a work example 4rm a financial institution who is into saving and loans

  16. rakesh says:

    thanks for above information…. i want to know how trial balance is scrutinizing… can u pls help me in this regard…

  17. ali wafa says:

    i ahce lots of difficulity in trial balane please help me
    thanks

  18. HASNAIN says:

    hi
    I need a Sample Trail Balance for small Manuafacter.
    Can you Help you me?
    Thanks

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