This is the first in a new periodic series of blog posts I am calling… What The?? This series will explain some common terms and features of small business accounting and tax. Today we are starting nice and easy with:
A trial balance is a report which is basically a list of all ledger accounts and their balances at a particular point in time, Accounting Professionals often use this report as a starting point when preparing annual financial statements.
Asset and expense accounts will usually have a debit balance and therefore will appear in the debit column.
Income, liability and most owners equity/ capital accounts will usually have a credit balance and therefore will appear in the credit column.
The totals of the debit and credit columns must be equal to each other, if they aren’t there’s something wrong. If you are generating a trial balance report that is unbalanced (i.e. the debit and credit columns do not come to the same total) it is probably a good idea to contact an accounting professional.
Click the link to see a sample Trial Balance report, this report shows two sets of debit and credit columns, the first being the balances for the month ended 31 October 2014 and the second being the balances for the year to date, based on the typical financial year of April – March this example would show the account balances for 01 April 2014 – 31 October 2014 (7 months).
If there are any specific accounting or tax terms you would like me to cover, or have any ideas or suggestions for future posts, please get in touch, I would love to hear from you.
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