CHAPTER 4 Account Balances & Trial Balance

CALCULATING THE BALANCE OF A T-ACCOUNT

Step 1 – Draw a line across the account at the end of the numbers and add the 2 sides of the account separately. These are called pencil footings.

Step 2 – Subtract the smaller total from the larger the total. Write the result beneath the larger of the 2 numbers and circle it. This is the account balance.

Bank10540 300 800 432

TRIAL BALANCE

Is a listing of the account balances found in a ledger.

It is used to see if:total debits = total credits.

It does not find all mistakes but it checks if the accounts balance.

CREATING A TRIAL BALANCE

Step 1 – Set up the Heading – Who? What? When?Step 2 – List all the accounts.Step 3 – Place the debit balances in the debit

column and the credit balances in the credit column.

Step 4 – Add up the 2 columns.Step 5 – Compare the totals and ensure that they

agree. If they do not agree, investigate why.

WHAT IF THE TRIAL BALANCE DOES NOT BALANCE??? YIKES!!!

Don’t worry! Go through the following steps in order:

1. Re-add the trial balance.2. Check that you have copied the balances

from the ledger correctly.3. Recalculate the ledger (t-account)

balances.4. Check that there is a balanced accounting

entry for each transaction.*You need to balance your trial balance!*

PRACTICE QUESTIONS

Read pg. 98 – 101 in your Textbook about the trial balance

Pg. 101 Review Questions #1, 2, 4, 5, 6, 7 Pg. 101 Exercise #1 Pg. 102 Exercise #2 & 3