Multiple Choice
Which of the following errors would cause a trial balance to not balance?
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2. Transaction Analysis
Trial Balance
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Which of the following statements correctly explains how to prepare a trial balance?
A
List all ledger account balances and total the debit and credit columns to ensure they are equal.
B
Include only revenue and expense accounts in the trial balance.
C
List all transactions from the journal in chronological order in the trial balance.
D
Record only the credit balances from the ledger accounts in the trial balance.
Verified step by step guidance1
Understand the purpose of a trial balance: A trial balance is a summary of all ledger account balances at a specific point in time. It is used to check the accuracy of the bookkeeping by ensuring that total debits equal total credits.
Identify the accounts to include: A trial balance includes all ledger accounts, not just revenue and expense accounts. This means assets, liabilities, equity, revenue, and expense accounts are all listed.
Extract balances from the ledger: For each account in the ledger, determine whether it has a debit or credit balance. These balances are derived from the transactions recorded in the journal and posted to the ledger.
Organize the trial balance: List all accounts in the trial balance, typically in the order of assets, liabilities, equity, revenue, and expenses. Record the debit balances in the debit column and the credit balances in the credit column.
Verify the totals: Add up the debit column and the credit column separately. Ensure that the total debits equal the total credits, as this confirms the bookkeeping entries are balanced.
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