Adjusting a Trial Balance Into a Classified Balance Sheet
The reason for preparing a trial balance sheet is to make sure that the beginning and ending balances for a company's accounts balance. A trial balance sheet is an in-house report listing all of a company's accounts included in the general ledger. Balances listed in the credit and debit columns are added to see if the totals equal. Once debit and credit balances are listed, any adjustments are entered, and the balance sheet, one of the financial statements usually requested by outside lenders, is prepared showing a company's assets and liabilities, in addition to the company's net worth.
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Instructions
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Set up a worksheet to prepare the end of accounting period financial statements. Start by entering a trial balance on the worksheet after all transactions for the accounting cycle have been posted to the general ledger.
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List assets and expenses as debit balances on the trial balance worksheet, showing liabilities, equity and revenue as credit balances. Record any negative balances in the appropriate debit or credit column.
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Check for any errors, as mistakes sometimes occur. Look for a double entry or transactions entered in the wrong account if the numbers don't balance.
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Post any adjusting or correcting entries in the adjustments columns. Carry over those same adjustments to the adjusted trial balance columns. Total the columns and check to see if they balance. Total debits should equal total credits.
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Record all revenue and expense account balances in the appropriate income statement columns. Record assets, liabilities, and equity account balances in the balance sheet columns on the worksheet. Calculate net income or loss.
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Prepare the balance sheet once the net income for the accounting period has been calculated (usually on a monthly basis), using the information recorded in the asset and liability accounts from the trial balance worksheet. Prepare the balance sheet report listing assets on the left side of the sheet, and liabilities and equity on the right. Most accounting departments use this traditional format.
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Tips & Warnings
Prepare the income statement before the balance sheet, using the revenue and expense accounts from the trial balance. You will need the net income amount from the income statement to record the equity on the balance sheet.
