Question

what is the procedure for making:

A-a trial balance

B- unadjusted trial balance

C- adjusted trial balance

D- financial statement

Answer 1

Features of Trial Balance:

• Trial Balance is the statement of balances of all ledgers account of any firms on a particular date.
• The total of both sides means debit and credit side should be equal as for any transaction there would be a debit and credit for the same amount.
• If the total of the debit and credit side is equal, it means that the ledger posting for each and every transaction has been done correctly.
• If the totals of both side columns are not matching, it means there is some error in ledger posting for any particular account, and the difference would be posted into a suspense account and would be rectified post discussion with management and concerned team.

Trial Balance Format

The initial trial balance report contains the following columns:

1. Account number

2. Account name

3. Ending debit balance (if any)

4. Ending credit balance (if any)

A. Trial Balance - The trial balance is a report run at the end of an accounting period, listing the ending balance in each general ledger account. The report is primarily used to ensure that the total of all debits equals the total of all credits, which means that there are no unbalanced journal entries in the accounting system that would make it impossible to generate accurate financial statements.

B. Unadjusted Trial Balance - Once all the monthly transactions have been analyzed, journalized, and posted on a continuous day-to-day basis over the accounting, preparation of trial balance post that is called unadjusted Trial Balance. A trial balance is a list of all accounts in the general ledger that have nonzero balances. The unadjusted trial balance includes accounts before they have been adjusted.

C. Adjusted Trial Balance - When the accounting team corrects any errors found and makes adjustments to bring the financial statements into compliance with an accounting framework (such as GAAP or IFRS), it is called the adjusted trial balance. The adjusted trial balance is typically printed and stored in the year-end book, which is then archived. Adjustment entries would comprise of transactions like prepaid expenses, closing stocks, depreciation etc. Once all necessary adjustments are done a new, the new trial balance is called the adjusted trial balance.

D. Financial Statements - Once the adjusted trial balance is ready, preparation of the financial statements is the next step. Financial statements includes : an income statement, a statement of retained earnings, a balance sheet, and the statement of cash flows. Income statements will include all revenue and expense accounts. The statement of retained earnings will include beginning retained earnings, any net income (loss) (found on the income statement), and dividends. The balance sheet is going to include assets, contra assets, liabilities, and stockholder equity accounts, including ending retained earnings and common stock.