Journalizing -- the recording of transactions using the double-entry system.

The recording is in five steps: (1)

date; (2) the account to be debited and the amount; (3) the account to be credited and the amount; (4) the
explanation and (5) the cross-reference to the General Ledger.

What is a Trial Balance?

A trial balance is a statement of ledger account balances within a Ledger, at a particular instance.

If we balance all the ledger accounts at a particular instance and then prepare a statement of balances we get the
"Trial Balance".

Trial Balance » Purpose

A trial balance is prepared to check the mathematical/arithmetic accuracy of accounting.

This is the only (main) purpose of the "Trial Balance".

Since it is anyhow prepared for a purpose, it is put to some other uses like for the preparation of final accounts
etc

Format of a Trial Balance

• Header Row
The heading row contains the heading for the trial balance. It consists of the details relating to name of the
organisation and the instance to which the ledger account balances pertain.
• Particulars
Each row in the trial balance pertains to the information relating to an account. The name of the Account head is
written in the particulars column.
• L/F » Ledger Folio
Ledger Folio gives the information relating to the page number in the ledger from which the information relating
to the ledger is being extracted.
• Debit amount
This is the amount whose information is extracted from the ledger account.

What the debit amount actually means is dependent on the method used for constructing the trial balance.
• Credit amount
This is the amount whose information is extracted from the ledger account.

What the credit amount actually means is dependent on the method used for constructing the trial balance.

Definition of Trial Balance

According to Carter, "Trial Balance is the list of debit and credit balances, taken out from ledger, it also includes
the balances of cash and bank taken from cash book."

According to Pickles, "The statement prepared with the help of ledger balances, at the end of financial year (or at
any other date) to find out whether debit total agrees with credit total is called Trial Balance".

According to Rowlland, "The final statement of balances, joint and mixed, is called Trial Balance".

Ideal definition, "On the basis of different definitions given by different accountants at different times, following
ideal definition of trial balance can be adopted :
"According to double entry system, after recording all the transactions into journal and posting them into ledger
and ascertaining their balances, the statement prepared to ascertain the arithmetical accuracy of accounts on a
certain date is called Trial Balance. It is the statement, on the basis of which Trading, Profit and Loss Account
and Balance Sheet is prepared".

On analyzing the above definition we obtain the following characteristics of Trial Balance :-

(1) According to double entry system. after recording all transactions until all Ute business transactions are
journalized, and posted, strictly according to double entry system, a trial balance can't be extracted.

(2) After finding out the differences of debit and credit sides of all the ledger accounts :- All the accounts opened
in ledger totaled and balances (differences) are ascertained, only then trial balance can be prepared.

(3) Prepared on a particular date : Generally trial balance is prepared at the end of accounting year, but it can also
be prepared monthly, half yearly or quarterly.

Preparation of Trial Balance

Trial Balance may be prepared either taking into consideration the total of each side of every ledger account.
Thus you may follow either "Total Method" or "Balance Method".

Total Method

If the total of debit sides of all the accounts in the ledger is placed in one column of the list and similarly total of
credit sides of all the accounts in the ledger is placed win another column of the list then this list of total (Trial
Balance) will be known to have been prepared with the Total Methods.

Balance Method

Second method of preparing Trial Balance is to find out the difference of the ' sides of every account. If debit
side of an account is bigger, than insert the difference on the credit side of the account. It is known as 'debit
balance'. If credit side of an account is bigger, then insert the difference on the debit side of the account. It is
known as 'credit balance'. Now prepare list of balances (Trial Balance) by putting all debits balances in one
column and credit balances in another column. Such method is known as Balance Method.
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Income statement (also referred as profit and loss statement (P&L), statement of financial performance,
earnings statement, operating statement or statement of operations) is a company's financial statement that
indicates how the revenue (money received from the sale of products and services before expenses are taken out,
also known as the "top line") is transformed into the net income (the result after all revenues and expenses have
been accounted for, also known as the "bottom line"). It displays the revenues recognized for a specific period,
and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and
amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported.

The important thing to remember about an income statement is that it represents a period of time. This contrasts
with the balance sheet, which represents a single moment in time.
Charitable organizations that are required to publish financial statements do not produce an income statement.
Instead, they produce a similar statement that reflects funding sources compared against program expenses,
administrative costs, and other operating commitments. This statement is commonly referred to as the statement
of activities. Revenues and expenses are further categorized in the statement of activities by the donor restrictions
on the funds received and expended.

The income statement can be prepared in one of two methods. The Single Step income statement takes a simpler
approach, totaling revenues and subtracting expenses to find the bottom line. The more complex Multi-Step
income statement (as the name implies) takes several steps to find the bottom line, starting with the gross profit.
It then calculates operating expenses and, when deducted from the gross profit, yields income from operations.
Adding to income from operations is the difference of other revenues and other expenses. When combined with
income from operations, this yields income before taxes. The final step is to deduct taxes, which finally produces
the net income for the period measured.

In financial accounting, a balance sheet or statement of financial position is a summary of the financial
balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity
are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a
"snapshot of a company's financial condition". Of the four basic financial statements, the balance sheet is the
only statement which applies to a single point in time of a business' calendar year.

A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories
of assets are usually listed first, and typically in order of liquidity. Assets are followed by the liabilities. The
difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of
the company and according to the accounting equation, net worth must equal assets minus liabilities.

Another way to look at the same equation is that assets equals liabilities plus owner's equity. Looking at the
equation in this way shows how assets were financed: either by borrowing money (liability) or by using the
owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities
and net worth in the other section with the two sections "balancing."

A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of
the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories
of goods and they acquire buildings and equipment. In other words: businesses have assets and so they can not,
even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe
money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits
at the end of each period. In other words businesses also have liabilities.