The Trial Balance | O Level Accounting 7707 & IGCSE Accounting 0452 | Detailed Free Notes To Score An A Star (A*)

General Journal

• All the general entries are made in the General Journal
• If not all books of prime entry are being used, then all entries are made in the General Jounral
  • Will cover Books of Prime Entry later.
• The entries are posted in the same format as the dual entry we covered before.
• Each entry must have EQUAL total debit and total credit.
• One entry can have multiple items on debit, credit or both sides.
• Remember to put a heading at General Journal in the center
  • First General Journal
  • Then on next line, company name
  • Then “As Per” and the date when it is being made as specified in the question.

T Accounts

• Once the general journal entries are made, we need to post them in the individual accounts of each asset, liability and owner’s equity account.
• T accounts are simple
  • Make the entry on the side of the account where it appears in the general journal
  • Name the entry with the other account’s name in the entry.
• The T-Account is in T shape
  • On the top-mid, you write the name of the account
  • On the right side, is the credit entries
  • On the left side, there is the debit entries
  • Do not forget to mention the currency at top
  • Do not forget to mention the dates of the entries
  • Do not forget to check for balance brought forward (Balance B/D) from previous month.
  • Do not forget to balance the account and find the Balance carried forward (Balance C/D) at the end of each month
    • It is found by totaling both sides of each account, and adding a carried forward amount on the smaller side (value vise), based on the difference that exists.
  • Do not forget to close the month, and put the entry for the Balance B/D for the next month.
  • More importantly
    • Remember, in normal conditions
      • Asset account has Balance B/D on the debit side.
      • Asset account has Balance C/D on the credit side
      • Liabilities and Owner’s Equity Accounts have balance B/D at the credit side
      • Liabilities and Owner’s Equity have balance C/D at debit sides.
      • Expenses, Income, Profit and Loss DO NOT HAVE BALANCE BD and CD, remember, their balance is transferred to the income statement (profit and loss statement) at the end of each period.
      • MORE IMPORTANTLY
        • Remember, Prepaid expenses is an ASSET account, not an expense account
        • Accrued expenses is a liability account, NOT A EXPENSE account
      • PREPAID EXPENSE ACCOUNT is an ASSET account, not an expense account – it is different from the expense accountAccrued expense account is a liability account, not an expense account – it is different form expense account

        Therefore, for example,

        Interest expense, Prepaid interest and accrued interests are three different accounts

        NEVER PASS THEIR ENTRY IN THE SAME T ACCOUNT

Trial Balance

• It is the total of all the debit and credit balances in all the T-accounts
  • Remember, balances means Balance C/D on these accounts.
• It has usually two parts
  • The right part shows all the debit accounts and their respective balances
  • The left part shows all the credit accounts and their respective balances
• Both sides must be equal in their grand total.
• Asset and expense accounts are usually on the left
• Liabilities, income and owner’s equity accounts are on the right
• Trial balance has a heading
  • In the middle at the top
  • First Trial Balance
  • Then Company Name
  • Then “For the period ended” (can be year month or whatever mentioned) and then the ending date mentioned in the question.
• Remember, Inventory amount in the Trial balance is opening inventory
  • Closing inventory stock count is provided at the end of the question in the adjustments
    • Because stock counting usually occurs after the yearly books are closed.
• The C/D balances on expenses and income accounts are transferred to the profit and loss statement (income statement) at the end of the period.
  • The trial balance shows the C/D values.