Section 3: Preparing A Trial Balance: - Enduring Understandings

Section 3: Preparing a Trial
Balance
Enduring Understandings:
The trial balance is proof that total

debits = total credits in the ledger.
To error is human.
Essential Questions:
How do you prepare a trial balance?

How do you find and correct errors in
the trial balance?

Balance
Objectives:
Demonstrate how to prepare a trial

balance.
Analyze business transactions using
prior knowledge of the four steps and
the rules to debits and credits
Journalize and post business
transactions

Balance
Objectives:
Locate and identify journal entries that

are incorrect
Use proper accounting principles to

correct the wrong journal entries using
the three methods
What is the purpose of a Trial

Balance?
A formal way to prove the ledger.
Fifth step in the accounting cycle
After all journal entries have been
posted to the accounts in the general
ledger .
What is the purpose of a Trial

Balance?
Step 1 ADD ALL Debit Balances
Step 2 ADD ALL Credit Balances
Step 3 COMPARE THE TWO TOTALS
DO THEY EQUAL?????
This is called.PROVING THE LEDGER!
Try it yourselves.
Problem 7-6
Step 1 ADD ALL Debit Balances
Step 2 ADD ALL Credit Balances
Step 3 COMPARE THE TWO TOTALS
DO THEY EQUAL?????
Correcting Entries
To err is human but to really foul
things up, you need a computer
What does this quote mean to you?
How does it apply to accounting?
Mistakes Will Happen

In accounting, if a mistake is madethere is
only 1 single rule that applies.
Making Correcting Entries

Depends
When the error is made
Where the error is made
3 Types of Errors you will See

An Error in the journal (the entry has not yet been
posted)
Journal Entry is correct, however you made a
mistake while posting to the ledger
Error in a journal entry that has already been posted
(both journal and ledger are incorrect)
What is wrong with the following

example (error type 1)?
How would you correct it?
If you discover an error before

posting!
Example: On January 1, Mrs. Nemec

invested $52,000 to open up a business
called: Nemecs Accountants
Date
Description
Jan 1 Cash in Bank

Mrs. Nemec, Capital
Post
Ref
Debit
Credit
$25,000
$25,000
Correcting in the Ledger, if

Journal Entry is correct
Date
Jan
Description
1
Post
Ref
Balance
Debit
Credit
Debit
G1
$25,000
$25,000
Credit
A Correcting Entry is made

when..
The journal entry has already been
posted, however the journal entry is
incorrect
Imagine the Following

Example:
On February 15, Nemecs Accountants paid
the monthly rent of $1,500
Rent Expense
Debit
$1,500
Credit
Cash in Bank
Debit
Credit
$1,500
However the Journal Entry that

was recorded is
Date
Description
Feb 15 Advertising Expense
Cash in Bank
Post
Ref
Debit
Credit
405 $1,500
101
$1,500
Acct Name: Advertising Expense

Date
Description
Post
Ref
Jan
G1
Feb
15
G2
Balance
Debit
Credit
Debit
$20,000
$20,000
$1,500
$21,500
Credit
Acct Name: Rent Expense

Date
Jan
15
Description
Balance
Post
Ref
Debit
G1
$2,000
Credit
Debit
$2,000
Credit
Make a Correcting Journal

Entry First
Date
Description
Post
Ref
Debit
Credit
401 $1,500
Advertising Exp. 405
$1,500
Feb 15 Rent Expense
Then Post your Correcting

Journal Entries
Acct Name: Advertising Expense

Date
Description
Post
Ref
Jan
G1
Feb
15
G2
Feb
15
Correcting G2
Entry
Balance
Debit
Credit
Debit
$20,000
$20,000
$1,500
$21,500
$1,500
$20,000
Credit
Acct Name: Rent Expense

Date
Jan
15
Feb
15
Description
Balance
Post
Ref
Debit
G1
$2,000
$2,000
$1,500
$3,500
Correcting G2
Entry
Credit
Debit
Credit
Try it yourselves
Problem 7.3 in your workbook & textbook
Check answers with me, then move on to
Problem 7.4 and 7.9 in your workbook
Problem 7.3 Solution

Date
May
10
Description
Post
Ref
Computer Equipment
120
Cash in Bank
101
Debit
Credit
$1,500
$1,500
Check 8099
20
Office Equipment
Computer Equipment
Memo 47
115
120
$1,500
$1,500
Account Name: Computer

Equipment
Date
May
Description
Post
Ref
Balance
10
20
G6
Correcting
Entry
G6
Balance
Debit
Credit
Debit
$3,000
$1,500
$4,500
$1,500
$3,000
Credit
Account Name: Office

Equipment
Date
May
20
Description
Post
Ref
Balance
Correcting
G6
Entry
Balance
Debit
Credit
Debit
$700
$1,500
$2,200
Credit

Section 3: Preparing A Trial Balance: - Enduring Understandings

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Section 3: Preparing a Trial

The trial balance is proof that total

How do you prepare a trial balance?

Section 3: Preparing a Trial

Demonstrate how to prepare a trial

Section 3: Preparing a Trial

Locate and identify journal entries that

Use proper accounting principles to

What is the purpose of a Trial

What is the purpose of a Trial

This is called.PROVING THE LEDGER!

Mistakes Will Happen

Making Correcting Entries

Where the error is made

3 Types of Errors you will See

What is wrong with the following

If you discover an error before

Example: On January 1, Mrs. Nemec

Jan 1 Cash in Bank

Correcting in the Ledger, if

A Correcting Entry is made

Imagine the Following

However the Journal Entry that

Feb 15 Advertising Expense

Acct Name: Advertising Expense

Acct Name: Rent Expense

Make a Correcting Journal

Feb 15 Rent Expense

Then Post your Correcting

Acct Name: Advertising Expense

Acct Name: Rent Expense

Problem 7.3 Solution

Account Name: Computer

Account Name: Office

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