Verifying Data in the General Ledger: Trial Balance:

Once data from journal entries have been posted to the general ledger, the equality of debits and credits dollar amounts is verified. Remember, if the total dollar amount of debits equals the total dollar amount of credits, the accounting equation will balance: assets = liabilities + stockholders' equity. As long as the accounting equation balances, the financial statements will tie together and, hopefully, provide useful information.

The process of verifying the equality of debits to credits in the general ledger is the preparation of a trial balance. A trial balance is a listing of the dollar balances in all general ledger accounts and a calculation of the total dollar amount of debits and credits on a given date. The Guitar Lessons Corporation's October 31 trial balance is shown below.
 

Guitar Lessons Corporation
Unadjusted Trial Balance
December 31

Acct. No.

Account

Debits

Credits

111

Cash

$10,280

 

113

Accounts Receivable

1,200

 

115

Supplies

525

 

211

Accounts Payable

 

$400

311

Common Stock

 

7,000

313

Retained Earnings

 

3,445

315

Dividends

 90

 

411

Fees Revenue

 

2,300

511

Supplies Expense

 450

 

517

Wages Expense

600

 

 

Totals

$13,145

$13,145

The following important points should be noted in the trial balance.

1. The trial balance heading shows the company's name, the name of the report (trial balance), and the date to which the information applies, October 31.

2. The accounts are listed in the order in which they appeared in the company's chart of accounts and general ledger. For example, cash is listed before accounts receivable, which in turn is listed before supplies.

3. The total debits ($13,145) equals the total credits ($13,145).


Practice Exercise
 

The Christopher Corporation's December 31 trial balance reported the following account balances: accounts payable = $600, accounts receivable = $1,400, cash = $10,400, common stock = 7,200, dividends = $100, fees revenue = $2,500, retained earnings = 3,700, supplies = $700, supplies expense = $600, and wages expense = $800. Determine the total dollar amount of the debits column on the Christopher Corporation's December 31 trial balance.

The total dollar amount of the debits column on the Christopher Corporation's December 31 trial balance is $14,000, which was determined as follows.

Account

Debits

Credits

Cash 

$10,400 

 

Accounts Receivable 

1,400 

 

Supplies 

700 

 

Accounts Payable 

 

$600 

Common Stock 

 

7,200 

Retained Earnings 

 

3,700 

Dividends 

100 

 

Fees Revenue 

 

2,500 

Supplies Expense 

600 

 

Wages Expense 

800 

 

Totals 

$14,000 

$14,000 

** You now have the background to do text exercise 3.5.

 

 

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