Q. Prepare a trial balance with example?
The Larry Fisher was captain of the football team at Prestige University. Afterwards he earned a master's degree in business administration with a concentration in accounting. Upon graduation Larry received a position with Financial Deals Inc in the accounting and finance division. At the start things were going smoothly. He was tall and good looking and had an outgoing personality. The president of the company obtains a liking to him. But Larry was a bit bothered when the president started asking him to do some things that were slightly unethical. When he protested gently the president said come on son this is the way the business world works You have great potential if you don't let things like this get in your way.
Since time went on Larry was asked to do things that were more unethical and finally he was performing illegal acts. When he oppose the president appealed to his loyalty and asked him to be a team player. The president as well promised Larry great wealth sometime in the future. Finally when he was told to fake some financial statements by making improper entries and to sign some documents containing material errors the president supported his request by stating that you are in too deep now to refuse to cooperate if I go down you are going with me. Through a variety of company schemes Larry had convinced some friends and relatives to invest about USD 10 million. Most of this would be lost if the variety of company schemes were revealed. Larry couldn't sleep at night and began each day with a pain in his stomach and by becoming physically ill. He was under great damage and believed that he could lose his mind. He as well heard that the president had a shady past and could become violent in retaliating against his enemies. If Larry puff the whistle he believes he will go to prison for his part in the schemes. Note this scenario is basis on an actual situation with some facts changed to protect the guilty. If you still can't find the error it may be because of one of the following causes:
- Deteriorating to post part of a journal entry.
- Redistribution a debit as a credit, or vice versa.
- Wrongly determining the balance of an account.
- recording the balance of an account wrongly in the trial balance.
- Skipping an account from the trial balance.
- Making a transposition or slide mistake in the accounts or the journal.
Typically you should work backward through the steps taken to prepare the trial balance. Assuming you have previously re-totalled the columns and traced the amounts appearing in the trial balance back to the general ledger account balances use the following steps Verify the balance of every general ledger account verify postings to the general ledger verify general journal entries and then review the transactions and possibly the source documents.
The impartiality of the two totals in the trial balance does not necessarily mean that the accounting process has been error-free. Serious fault may have been made such as failure to record a transaction or posting a debit or credit to the wrong account. For example if a transaction involving payment of a USD 100 account payable is never recorded the trial balance totals still balance but at an amount that is USD 100 too high. Both accounts payable and cash would be overstated by USD 100.
You are able to prepare a trial balance at any time at the end of a day or a week and a month, or a quarter or a year. Usually you would prepare a trial balance before preparing the financial statements.