• Prepare a trial balance

 

Here is the completed ledger for NeatNiks for the month of October:

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	1		GJ1	20,000.00		20,000.00
Oct	4		GJ1		12,000.00	8,000.00
Oct	15		GJ1	1,500.00		9,500.00
Oct	25		GJ1		2,600.00	6,900.00
Oct	26		GJ1		1,000.00	5,900.00
Oct	30		GJ2	1,600.00		7,500.00
Oct	31		GJ2		4,000.00	3,500.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	20		GJ1	7,250.00		7,250.00
Oct	30		GJ2		1,600.00	5,650.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	7		GJ1	2,600.00		2,600.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	4		GJ1	12,000.00		12,000.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a				0.00
Oct	7		GJ1		2,600.00		2,600.00
Oct	26		GJ1	1,000.00			1,600.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a				0.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a				0.00
Oct	1		GJ1		20,000.00		20,000.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	31		GJ2	4,000.00		4,000.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a				0.00
Oct	15		GJ1		1,500.00		1,500.00
Oct	20		GJ1		7,250.00		8,750.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	25		GJ1	1,500.00		1,500.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct						0.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct						0.00

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	25		GJ1	1,100.00		1,100.00

When we wrote our journal entries, if we made sure that debits were equal to credits, and if we posted those journal entries exactly as they were writing, then it would be mathematically impossible for the total debits to not equal total credits in the ledger. There’s an easy way to check this: run a trial balance.

First, list all the ledger accounts.

Put all the debit balances in one column, and all the credit balances in another, and compare the totals, like this:

 

NeatNiks
Trial Balance (unadjusted)
For the month ended October 31, 20XX

Reference No.	Accounts	Debits	Credits
110	Checking	3,500.00
120	Accounts Receivable	5,650.00
125	Supplies	2,600.00
130	Prepaid Rent	12,000.00
210	Account Payable		1,600.00
220	Contractor Payable		–
310	Nick Frank, Capital Contributions		20,000.00
330	Nick Frank, Withdrawals	4,000.00
410	Service Revenue		8,750.00
510	Insurance Revenue	1,500.00
520	Rent Expense	–
530	Supplies Expense	–
540	Contractor Expense	1,100.00
	Totals	Single line 30,350.00 Double line	Single line 30,350.00 Double line

Once you have determined that total debits equals total credits, you can start to look at the accuracy of individual accounts. Just because the trial balance is in balance, doesn’t mean everything is correct. For instance, you could have posted a journal entry completely backward or left one out. In addition, we may need to make some additional journal entries. We should have a rent expense for October, some supplies expense, and we owe our independent contractors some payments too. We’ll cover these adjusting journal entries in the next section, and then we’ll be ready to produce some financial statements.