Prepare a Trial Balance

Learning Outcomes

  • Prepare a trial balance

Here is the completed ledger for NeatNiks for the month of October:

General Ledger
Account: CashAccount No. 110
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 1 GJ1 20,000.00 20,000.00
Oct 4 GJ1 12,000.00 8,000.00
Oct 15 GJ1 1,500.00 9,500.00
Oct 25 GJ1 2,600.00 6,900.00
Oct 26 GJ1 1,000.00 5,900.00
Oct 30 GJ2 1,600.00 7,500.00
Oct 31 GJ2 4,000.00 3,500.00
General Ledger
Account: Accounts ReceivableAccount No. 120
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 20 GJ1 7,250.00 7,250.00
Oct 30 GJ2 1,600.00 5,650.00
General Ledger
Account: SuppliesAccount No. 125
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 7 GJ1 2,600.00 2,600.00
General Ledger
Account: Prepaid RentAccount No. 130
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 4 GJ1 12,000.00 12,000.00
General Ledger
Account: Accounts PayableAccount No. 210
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 7 GJ1 2,600.00 2,600.00
Oct 26 GJ1 1,000.00 1,600.00
General Ledger
Account: Contractor PayableAccount No. 220
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
General Ledger
Account: Nick Frank, CapitalAccount No. 310
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 1 GJ1 20,000.00 20,000.00
General Ledger
Account: Nick Frank, WithdrawalsAccount No. 320
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 31 GJ2 4,000.00 4,000.00
General Ledger
Account: Service RevenueAccount No. 410
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 15 GJ1 1,500.00 1,500.00
Oct 20 GJ1 7,250.00 8,750.00
General Ledger
Account: Insurance ExpenseAccount No. 510
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 25 GJ1 1,500.00 1,500.00
General Ledger
Account: Rent ExpenseAccount No. 520
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 0.00
General Ledger
Account: Supplies ExpenseAccount No. 530
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 0.00
General Ledger
Account: Contractor ExpenseAccount No. 540
Date Item Post. Ref. Debit Credit Balance
Debit Credit
20–
Oct 1 Balance a 0.00
Oct 25 GJ1 1,100.00 1,100.00

When we wrote our journal entries, if we made sure that debits were equal to credits, and if we posted those journal entries exactly as they were writing, then it would be mathematically impossible for the total debits to not equal total credits in the ledger. There’s an easy way to check this: run a trial balance.

First, list all the ledger accounts.

Put all the debit balances in one column, and all the credit balances in another, and compare the totals, like this:

 

NeatNiks
Trial Balance (unadjusted)
For the month ended October 31, 20XX
Reference No. Accounts Debits Credits
110 Checking 3,500.00
120 Accounts Receivable 5,650.00
125 Supplies 2,600.00
130 Prepaid Rent 12,000.00
210 Account Payable 1,600.00
220 Contractor Payable –
310 Nick Frank, Capital Contributions 20,000.00
330 Nick Frank, Withdrawals 4,000.00
410 Service Revenue 8,750.00
510 Insurance Revenue 1,500.00
520 Rent Expense –
530 Supplies Expense –
540 Contractor Expense 1,100.00
Totals Single line 30,350.00
Double line		 Single line 30,350.00
Double line

Once you have determined that total debits equals total credits, you can start to look at the accuracy of individual accounts. The Trial Balance tests the equality of debit and credits.  Just because the trial balance is in balance, doesn’t mean everything is correct. For instance, you could have posted a journal entry completely backward or left one out. In addition, we may need to make some additional journal entries. We should have a rent expense for October, some supplies expense, and we owe our independent contractors some payments too. We’ll cover these adjusting journal entries in the next section, and then we’ll be ready to produce some financial statements.

Practice Question