1. The Trial Balance

2. Last Week We went through – Debits and Credits Talked about the steps in recording transactions – Recognize the MIN two accounts affected – Do they go up or down? – By how much? – Do we debit or credit? Opening the Ledger

3. Calculating New Balances in the Accounts At any given time, an accountant needs to know how much money is in each account – Especially after many transactions have taken place Example: – Yesterday’s homework – your cash account was touched several times

4. Calculating New Balances in the Accounts For any given account – when we are done with transactions we will: – Add the Debit side – Add the Credit side – Subtract the smaller amount from the larger – Place the answer on the larger side of the account

5. Calculating New Balances in the Accounts Cash $500 $2500 $200 $45 $2700$545 BALANCE: $2155

6. Trial Balance In order to know if the account has recorded all the transactions correctly – We must know if debits = credits Trial Balance – A list of the ledger account balances. (T-Accounts) – The total of the debit balances should equal the total of the credit balances. – Balance indicates mathematical accuracy

7. Trial Balance The Trial Balance is a financial statement – Therefore, we need to prepare it in a formal manner – Title Similar three lines to B/S & I/S WHO?PT’s Pizza WHAT?Trial Balance WHEN? December 31, 2011 – Accounts are listed in the order they appear in the ledger Assets, Liabilities, Owner’s Equity, Revenue & Expenses Usually the same order as they would appear on the B/S and I/S

8. Trial Balance Cash $25000 $300 $3500 $2,100 BALANCE: $26,300 BALANCED!!

9. Limitations of the Trial Balance Will not find an error if the wrong account was chosen – Example: Debit furniture rather than equipment Will not find if the account mixed up debits and credits for one account – Example: Paid money owing $500 Debit Cash $500 & Credit A/P $500

10. Preparing the New Balance Sheet After a Trial Balance is recorded & the accountant is confident in their transaction records – Post the new totals to a balance sheet

11. Homework Page 57-58 in textbook – Q #11, 12, 13