Preparation of Trial Balance

Trial balance is a statement that shows the balances of all ledger accounts on a particular date. It is prepared to ensure that the total of all debits equals the total of all credits. A trial balance is the first step in the preparation of financial statements. Here are the steps for preparing a trial balance:

Step 1: Prepare a Worksheet

The first step in preparing a trial balance is to prepare a worksheet. The worksheet is a document that lists all the accounts in the ledger and their balances. The worksheet is used to prepare the trial balance.

Step 2: List All Accounts

List all the accounts in the ledger. Each account should have a title and a balance.

Step 3: Determine the Balance of Each Account

Determine the balance of each account by adding up all the debits and credits for that account. If the total of debits is more than the total of credits, the account has a debit balance. If the total of credits is more than the total of debits, the account has a credit balance.

Step 4: Total the Debits and Credits

Total the debits and credits and make sure they are equal. If they are not equal, there is an error in the ledger.

Step 5: Prepare the Trial Balance

Prepare the trial balance by listing all the accounts in the ledger and their balances. The trial balance should show the debit balances in one column and the credit balances in another column.

Correcting the Trial Balance for Jamal

Here is the trial balance of Jamal that was wrongly prepared by an accountant:

| Account | Debit | Credit |
|------------------------|---------|---------|
| Cash | 15000 | |
| Accounts Receivable | 10000 | |
| Prepaid Rent | 2000 | |
| Equipment | 40000 | |
| Accumulated Depreciation | | 5000 |
| Notes Payable | | 25000 |
| Accounts Payable | | 15000 |
| Common Stock | | 30000 |
| Retained Earnings | | 15000 |
| Sales Revenue | | 20000 |
| Cost of Goods Sold | 12000 | |
| Rent Expense | 3000 | |
| Salaries Expense | 5000 | |
| Utilities Expense | 2000 | |

Step 1: Check for Errors

The accountant must check for errors in the ledger. If there are any errors, they must be corrected before preparing the trial balance.

Step 2: Prepare the Correct Trial Balance

The correct trial balance for Jamal is as follows:

| Account | Debit | Credit |
|------------------------|---------|---------|
| Cash | 15000 | |
| Accounts Receivable | 10000 | |
| Prepaid Rent | 2000 | |
| Equipment | 40000 | |
| Accumulated Depreciation | | 5000 |
| Notes Payable | | 25000 |

Where trial balance