The accounting statement which you use in a double entry accounting system is known as a trial balance. It helps in report all the debit and credit to help you to identify any recording errors.
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Benefit of Trial Balance
- It helps in detecting error if there is in summation of debits and credits.
- It helps in detecting abnormal account balances.
- It detects the negative balance in expense account which you need to rectify.
Making of Trial Balance Sheet
For preparing trial balance sheet you need 3 columns that are:
- Left Column: Its label can be cash, account receivable, land, account payable, utilities expenses.
- Debit Column: In contains the amount which is debited (gave some one) from our account.
- Credit column: In contains the amount which is credited (receive from someone) in our account.
In order to start working on trial balance sheet you need
- Firstly, prepare your list of accounts.
- Then add columns in it.
- It should also contain column of adjust journal entries.
In the trial balance the account must be appear in the following manner:
In the assets category the asset which is closer to becoming cash will appear in first and the least appear in last.
In the liability category those liabilities which come with the shortest maturities appears first and with the largest maturities appears in last.
In last total the debits and credits which are come from T-accounts or ledger card. If the left side balance is greater in T-Account then balance is debit and if the right side amount is greater than the balance is credit. The balance is to be calculated after each transaction while you are using Ledger card. The balance must be equal to the balance of normal account.
Follow the steps in order to correct the error:
- Firstly try to re-totaling of the two columns.
- Then divide the difference of total by 2 and then by 9.
- If the difference of the total is divisible by 2 then it means that you must have transfer debit balance to credit or credit balance to debit.
- In this case you must look for the amount in trial balance which is equal to one half of the difference.
- If the difference of the total is divisible by 9 then it means that made transposition error in transferring balance to the trial balance or a slide error.
- Transposition error means error occurs due to reverse of two digits.
- Slide error means error occurs due to incorrect placement of decimal.
- In this case you must compare the trial balance amount with the general ledger account balance.
- Search for the error in Post part of journal entry.
- Posting of debit amount as credit or credit amount as debit.
- You must be determining the balance incorrectly.
- You are recording the balance of account incorrectly in trial balance.
- You must omit any of the account from the trial balance.
- Transposition or slide error.
Advantages of Trial Balance
The trial balance help in verifying the accuracy of your ledger accounts. It also helps in preparing the financial statements. A Trial Balance helps in the following areas:
1. Find out the Accuracy of the Ledger Account
- The first step is to determine if all your debit or credit entries are recorded properly or not.
- It provides you the summary of general ledger account.
- If the debit column is equal to the credit column then the financial transaction is recorded properly.
- Keep in mind that if the credit and debit amount is equals it doesn’t means that your account is accurate. It just means that you have recoded transaction correctly.
2. Finding Errors
Accounting errors occur in any stage of the accounting process. Following are the accounting process stages:
- Sum up the subsidiary books.
- Recording of journal ledger in journal entries of the transaction.
- Calculating the balances of the various accounts.
- Carrying the balance of the accounts to the trial balance sheet.
- Balancing the trial balance columns.
3. Preparing of Financial Statements
- The correct balance statements help in preparing basic financial statements including the income statement and balance sheet.
- With the help of correct and balance out trial balance sheet you can easily prepare the financial statements. There is no need to go through each and every ledger account.
- All the revenue and expenses of trial balance must be shown in trading and profit and loss account.
- The company balance sheet shows the detail about all your liabilities, assets, capital account which are appearing in the trial balance sheet.
4. Helps in taking Managerial Decisions
- The company manager can find out the financial or the growth of the company easily by the trial balance sheet.
- Company can easily track about some of the important accounts like purchase, debtor, sales etc.
- Business management can do comparative analysis and peer analysis.
- Analysis helps business to understand the business trends and able to take the step according to their needs.
- The decision taken by the company is like manufacturing cost, business expenses and incomes etc.
- The management comes up with the financial budget for the coming accounting period.
5. Summary of Financial Transaction
- It provides the detail summary of financial transaction of your business.
- Company can prepare summaries by transferring the balances of various income, assets, liability, expenses and capital account.
- These summaries help you to locate journal entries in the original book of accounts.
- It helps in carry out the audit of your financial statement.
- You can provide the comments in order to prepare the audit report.
Uses of Trial balance
Trial balance sheet is a is a internal report which you prepare to make ensure that journal entries are correctly balance in ledger. Lets understand the various uses of trial balance sheet. Following are the uses:
- It is the initial step in order to prepare the basic financial statement. These statements are the balance sheet of the company and trading and profit and loss account.
- It helps in finding the error in the account. You can easily find the error if there is by tallying the sum of your both the column i.e is debit and credit. If the amount of both the column is equal that means there is no error in the account but if there is error then you should find for it.
- It helps in assuring the arithmetical accuracy of the general ledger account.
- It helps in giving the snapshot of the transaction to the accountants and the auditors.
- If there is any error you can easily find it and adjust it.
There are some errors which are to be identifying in trial balance accounting. These types of accounting errors are classified in four categories. The four categories are:
Error of Commission
These errors are committed due to the following reasons:
- The financial transactions are posted incorrectly.
- You have done mistake while totaling the amount.
- The account is not properly balanced.
- The subsidiary books are not casted properly.
- The amount is recorder incorrectly in the journal.
Error of omission
The error which is committed due to the wrong recording of the financial transaction in the journals. There are two types of error of omission, they are:
- Complete omission Error: It occurs when you completely omit the financial transaction from the record.
- Partial omission Error: It occurs when you partially mean some part of the transaction is omitted from the record.
Errors of Principle
In the accounts you record accounting entries according to the GAAP. GAAP stands for generally accepted accounting principles. When you commit any errors due to ignorance or violating any of the accounting principles.
When there is no impact of error on tallying of the trial balance such error is known as compensating errors.
Trial Balance Includes
Trial balance sheet include the following in it:
- The list of general ledger accounts ending with the debit and credit balances.
- It includes the account number of each general ledger account.
- Description of accounts is also included in the trial balance sheet.
- It shows name of the entity and the date of financial period.
- It also shows the adjustment entries.
- It shows adjusted and unadjusted balances of the ledger accounts.
- It shows financial transaction separately by the accounts.
How to Generate a Trial Balance Report in QuickBooks Online
Step 1: Go to the Report at left menu bar, and after that start typing the “trial balance” in the search field at Go to Report.
Step 2: Then Select the Trial Balance from the list and change the date in on the screen to reflect the dates you want.
We hope this article helps you in understanding about the trial balance sheet in QuickBooks. In order if you have any query regarding the trial balance sheet then you can call us, our expertise make sure that you will understand and able to do work easily in the trial books. With this you can easily complete your job without any error is less time.
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How can I get Trial Balance Report in QuickBooks Desktop?
BY performing the following steps you can get the trial balance report in QuickBooks Desktop:
Click on the report menu in QuickBooks online account.
In the search menu enter journals and click the report in order to open it.
Now set the report period date.
Click on the customize button.
Scroll down and click on the changes of column.
Is Trial Balance and Balance Sheet are same?
Trial balance is the first step towards preparing the balance sheet of the company.
What do You Mean by Trial Balance Report?
Trial balance report is a book keeping worksheet in which balance of all the ledgers are calculated in credit and debit account and the amount of the both credit and debit must be equal.
How can I Extract Trial Balance from the QuickBooks?
Steps to be performed are:
Click on the report tab.
Select accounts and taxes.
The trial balance sheet page is open.
Now set the date in the trial balance sheet and then click on the excel drop down menu.
Choose create for creating the new worksheet.
In order to export follow all the on screen instructions.
What is the Another Name of the Trial Balance?
In accounting language or in accounts it is known as books.
In balance sheet it is known as financial statement.
How many Types of Trial Balances are There?
There are three types of balances are:
Unadjusted Trial Balance
Adjusted trial balance.
Post closing trial balance.
What type of Reports is Generated in Trial Balance?
Two types of report are there:
Why Trial Balance Sheet is Generated?
It is used to see whether the total of debit balances is equal to the credit balance.
What is the Formula of Trial Balance?
The Formula is:
Liabilities + Revenue + Owners equity
What are the Keys used for Reporting Types in QuickBooks Online?
QuickBooks Report types are: