Financial Statements – Trial Balance
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I decided to skip ahead a little and introduce the financial statements. We’ve covered the basics well enough to make sense of them so for now, let’s stick to the subject of the Payoff and go back to cover the details of subledgers and month ends in future posts.
The General Ledger takes the information from transactions and summarizes it by Account and by Accounting Period. The four basic Financial Statements present General Ledger (GL) Accounts and their balances for specific date ranges, usually accounting periods. The four basic financial statements are:
In this Post, I’ll introduce the most basic and simple of the statements -The Trial Balance. The Trial Balance is a listing of all General Ledger (GL) Accounts and their balances at any given time in order of GL Account Number.
The Trial Balance is different from the other Financial Statements because it is the only one that lists all Accounts, the Income Statement and the Balance Sheet split the Accounts and the Cash Flow Statement uses the same Accounts as the Balance Sheet.
The Standard Trial Balance is straight forward and doesn’t require any further explanation. It is a quick report that can be printed or viewed to check the balance of specific accounts and to make sure that the books are in balance – that debits = credits.
The Comparison Trial Balance is also straight forward and provides the same information as the standard version but it gives balances both by account and by accounting period. Time analysis is essential in managing and securing resources because it can quickly pinpoint changes that indicate errors or fraud as well as the unexpected changes that might require adjustments to cash planning and/or operations.
We have already seen both versions of the Trial Balance and I’ll reprint them here for review.
Standard Trial Balance as seen in Post #4 (with Account Numbers that were added in Post #5)
| Account | Description | Debits | Credits |
| 1000 | Checking Account | $44,350 | |
| 1200 | Accounts Receivable | $0 | |
| 1500 | Office Equipment | $1,300 | |
| 1520 | Office Furniture | $1,650 | |
| 2000 | Accounts Payable | $1,700 | |
| 4000 | Sales | $50,000 | |
| 7000 | Rent | $3,000 | |
| 7020 | Office Supplies | $150 | |
| 7040 | Subscriptions | $300 | |
| 7060 | Utilities | $125 | |
| 7100 | Fuel | $275 | |
| 7200 | Repairs and Maintenance | $500 | |
| 7300 | Credit Card Interest and Fees | $50 | |
| Totals | $51,700 | $51,700 |
This is the Comparison Trial Balance Report from post # 7
| Account | Description | … | Jun | Jul | Aug | Sept | Oct | Nov | Dec | Total |
| 1000 | Checking | … | $0 | $0 | $0 | -$3,000 | $0 | $0 | $0 | $-3,000 |
| ….. | ………. | … | … | … | … | … | … | … | … | … |
| 7000 | Rent | … | $0 | $0 | $0 | $3,000 | $0 | $0 | $0 | $3,000 |
| Totals | … | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
**This example starts with June because of space limitations here.
Next Up: Financial Statements – Income Statement
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**disclaimer: All information posted on this blog is from my own experience and training. The guidelines I present are general and in my experience, standard practice. I do not write with authority from any Accounting Standards Boards.
