by Trial balance is the complete list of debit and credit balances from ledger accounts that is prepared by the businesses at a given date. Trail balance has two sides such as debit and credit sides that should be equal because equal sides make it sure that your ledger accounts are properly maintained under double entry system. It is best way to gauge the efficiency of an entity accounts. Some people think that balancing of two sides reflects accuracy of financial statement, but this can be due to some missing transactions therefore these types of errors are known as error of omission. Trial balance sheet is best way to figure out budget of your company because trial balance helps you to balance your income and expenditure. You can easily prepare an accurate trial balance sheet without any problem by maintaining proper ledger account.
Tips to Keep Trial Balance Accurate
It is necessary to design accurate trial balance in order to design other financial statements and for your help I am going to share some tips keep trial balance accurate:
- In first step, you have to determine the total debits of your company such as assets or expenses. Trial balance should include cash on hand, inventory and depreciation of properties on the left-hand side.
- Trial balance will help you to design profit and loss account, income statement and balance sheet so you have to check for the liabilities, revenue and equity. Liabilities and expenses both are different because liabilities are money owed that you will pay in future.
- Sort your items in different categories to prepare an accurate trial balance sheet. For instance, you can prepare an operation category to cover payroll costs and insurance expenses. Do not create more than six categories because it will make your work complicated.
- Write the name of categories on the left side of your sheet and write the names of items inside the categories. Use bold fonts and capital words to highlight names of the categories.
- Second column is designed to add numeric debit amounts that are written next to appropriate headings. Credit and debit amounts are written on the right and left sides of the trial balance respectively. Always use parenthesis to put the negative amounts.
- You can add different rows and columns in the bottom of the sheet to manage your trial balance. After completing your trial balance, you have to check the total of both sides to see either the numbers match or not. If you find any error, then you have to check your general ledge account.
- In order to note down depreciation, you have to divide the value of property in the total number of years and then divide it again with 12 to get total figure.
- You have to create a new sheet in the beginning of each new month, but you can also design trial balance on weekly basis.
