Slide 6.
Frank Wood’s
Business Accounting 1
Chapter 6
The trial balance
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 6.2
LEARNING OBJECTIVES
After finishing this chapter, you will 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;
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, 14th Edition, © Pearson Education Limited 2018
Slide 6.3
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, 14th Edition, © Pearson Education Limited 2018
Slide 6.4
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, 14th Edition, © Pearson Education Limited 2018
DRAWING UP A TRIAL
Slide 6.5
BALANCE
The first stage is to balance each T-
account.
May 31 Balance c/d 994
994 994
June 1 Balance b/d 994
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 6.6
DRAWING UP A TRIAL BALANCE
(CONTINUED)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 6.7
Drawing up a trial balance
(Continued)
The second stage is to enter the account balances
into the appropriate column.
1129 1129
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 6.8
Drawing up a trial balance
(Continued)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 6.9
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, 14th Edition, © Pearson Education Limited 2018
TRIAL BALANCES AND
Slide 6.10
ERRORS
It is 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, 14th Edition, © Pearson Education Limited 2018
Slide 6.11
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, 14th Edition, © Pearson Education Limited 2018
Slide 6.12
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 statement of financial position.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 6.13
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Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
