A trial balance represents a simple way to check to see if your debits equal your credits over several accounts within your company. You usually run a trial balance toward the end of a financial period, whether at the close of a month, quarter, or year. This type of balance sheet prepares your small business for making more formalized financial statements.
How to Make a Trial Balance Sheet
Typically, you put your various accounts in a three-columned sheet. The label for the account sits at the far left, such as Cash, Accounts Receivable, Land, Accounts Payable, or Utilities Expense. The column just to the right of that lists your debits in dollars. Credits go in the column to the right of the debits column.
To start your trial balance sheet, list your accounts, add a column for debits, and then add a column for credits. Enter the total for each account in the appropriate column, and total them at the bottom. Your trial balance should have your debits and credits equal at the bottom.
Your trial balance can also contain columns to reflect adjusting journal entries. This lets you track changes from an original trial balance to an adjusted trial balance.
Why Have a Trial Balance?
Running a trial balance helps you detect any possible errors. If the summation of all debits doesn’t equal all credits, you know you have a posting error. In addition, a trial balance can help detect abnormal account balances. For example, a trial balance can reveal a negative balance in an expense account that you need to rectify.
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