Preparing the trial balance is the initial works of the financial reporting process because these statements could assist the accountant in drafting the report easily and mathematically correct. The following are the three simple steps that you can use to prepare BT at the end of your organization.
In case you are using the accounting system to record your entity’s financial information, TB is already automatically prepared for you.
All you need to do is extract it in the spreadsheet format and then start drafting financial statements. But, understanding how this statement is prepared could help you a lot in adjustment entries, especially correction adjustment.
In this article, we will explain how to prepare trial balance manually in three simple steps:
Close all General Ledger accounts that you have. This is the first thing you need to do. For example, per your chart of accounts, you have 100 ledgers, and all you need to do is close all of those accounts.
For example, the Salaries Expenses account is closed, and the total amount will use in the second step. Closing the mean balancing the debit and credit amount of Salaries Expenses.
Salaries expenses that are initially recorded on the debit side in the T account and the balancing amount would be on the credit side. This will then carry into the debit side of the trial balance.
Once you complete closing all General Ledger, all you need to do is transfer the carrying forward balance to trial balance. If the closing balance per general ledger is at Debit, then post in the credit of TB. As per the example above, the assets items are kept at the top and followed by liabilities, equities, revenues, and expenses.
This structure could help both accountants and auditors who use TB to draft financial statements to easily identify which items are assets and which items are liabilities, and so on. Once you complete the movement from general ledger to trial balance, the next step you need to do is start reconciling the TB.
In this step, you need to reconcile the balance in credit and debit of your trial balance. If there is a difference between debit and credit, you need to double-check with the accounting entry in the general ledger.
The difference mainly because of inputting the difference amount of the same transactions in debit and credit. Duplicating and eliminating would not make a difference.
This is the final stage of preparing the trial balance, and you can start drafting your financial statements. However, you can scan through the entire TB to ensure that the numbers of items or accounts present in the trial balance are the same as your understanding.
Just in case the mistakes occur since the entry in the ledgers, and you cannot detect them at that time. The following are examples of adjusted and unadjusted trial balances.
Example of unadjusted trial balance:
Example of adjusted trial balance: