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
To calculate the trial balance, first determine the balance of each general ledger account as shown in the following example:
General Ledger
Cash
1
7500
17
400
25
425
15
1000
28
500
Bal. 6825
17
700
25
425
Bal. 275
8
2500
18
275
Bal. 2225
28
500
8
2500
Bal. 2000
Capital
1
7500
Bal. 7500
Revenue
17
1100
Bal. 1100
Expenses
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
o Error in numeric value
o Error in transferring a debit or credit to the proper column
o Omission of an account
· Error in the calculation of a ledger account balance
· Error in posting a journal entry to the ledger
o Error in numeric value
o Error in posting a debit or credit to the proper column
· Error in the journal entry
o Error in a numeric value
o 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.
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