Slide 6.

Chapter 6
The trial balance

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.2

Learning objectives
After you have studied this chapter, you
should be able to:

 Prepare a trial balance from a set of

accounts

 Explain why the debit and credit trial

balance totals should equal one another

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.3

Learning objectives (Continued)

 Explain why some of the possible errors
that can be made when double entries are
being entered in the accounts do not
prevent the trial balance from ‘balancing’

 Describe uses for a trial balance other than

to check for double entry errors

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.4

Review of double entry

bookkeeping
 For each debit entry there is a credit entry
and for each credit entry there is a debit
entry.
 The total of all the items recorded in all the
accounts on the debit side should equal
the total of all the items recorded on the
credit side of the accounts.
 To check that there is a matching credit
entry for every debit entry, we prepare a
trial balance.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.5

Summing up & Trial Balance

Journal entries, Balanced T-Accounts, Trial Balance

20X6 May 1 Started in business with capital in cash of £800 and £2,200
in the bank.
== 2 Bought goods on credit from the following persons: J Ward £610;
P Green £214; M Taylor £174; S Gemmill £345; P Tone £542.
== 4 Sold goods on credit to: J Sharpe £340; G Boycott £720; F Titmus
£1,152.
== 6 Paid rent by cash £180.
== 9 J Sharpe paid us his account by cheque £340.
== 10 F Titmus paid us £1,000 by cheque.
== 12 We paid the following by cheque: M Taylor £174; J Ward £610.
== 15 Paid carriage by cash £38.
== 18 Bought goods on credit from P Green £291; S Gemmill £940.
== 21 Sold goods on credit to G Boycott £810.
== 31 Paid rent by cheque £230.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.6

The trial balance

The trial balance is a list of account
balances arranged according to whether
they are debit balances or credit balances.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.7

Drawing up a trial balance

The first stage is to balance each T-account.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.8

Drawing up a trial balance

(Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.9

Drawing up a trial balance

(Continued)
The second stage is to enter the account
balances into the appropriate column.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.10

Drawing up a trial balance

(Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.11

Drawing up a trial balance

(Continued)
 The trial balance always has the date of the
last day of the accounting period to which it
relates. It is a snapshot of the balances on the
ledger accounts at that date.
 The totals of the two columns must always
match.
 A trial balance can be drawn up at any time
but it is normal practice to prepare one at the
end of an accounting period before preparing
an income statement and statement of
financial position.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.12

Trial balances and errors

 Itis easy to assume that if the trial balance
balances, the entries in the accounts must
be correct. However, there are several
types of error that will not affect the
balancing of a trial balance.
 Errors that are revealed include: addition
errors; using one figure for the debit entry
and another for the credit entry; entering
only one side of the transaction.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.13

Inventory in the trial balance

 The closing inventory figure is not found in
an account in the ledger and so does not
appear in the trial balance. It is noted
underneath the total figure and
incorporated into the financial statements
later.
 Opening inventory is recorded in a ledger
account and so would be included in a trial
balance prepared.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 6.14

Learning outcomes
You should have now learnt:
1. How to prepare a trial balance
2. That trial balances are one form of
checking the accuracy of entries in the
accounts
3. That errors can be made in the entries to
the accounts that will not be shown up by
the trial balance
4. That the trial balance is used as the basis
for preparing income statements and
statements of financial position
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012