section 3: preparing a trial balance enduring understandings: the trial balance is proof that total...
TRANSCRIPT
Section 3: Preparing a Trial Balance
• Enduring Understandings: • The trial balance is proof that total
debits = total credits in the ledger.• To error is human.
• Essential Questions:• How do you prepare a trial balance?• How do you find and correct errors in
the trial balance?
Section 3: Preparing a Trial Balance
• Objectives: • Demonstrate how to prepare a trial
balance.• Analyze business transactions using
prior knowledge of the four steps and the rules to debits and credits
• Journalize and post business transactions
Section 3: Preparing a Trial Balance
• Objectives: • Locate and identify journal entries that
are incorrect
• Use proper accounting principles to correct the wrong journal entries using the three methods
What is the purpose of a Trial Balance?
• A formal way to prove the ledger.
• Fifth step in the accounting cycle
• After all journal entries have been posted to the accounts in the general ledger …….
What is the purpose of a Trial Balance?
Step 1 – ADD ALL Debit Balances Step 2 – ADD ALL Credit Balances Step 3 – COMPARE THE TWO TOTALS
DO THEY EQUAL?????
This is called….PROVING THE LEDGER!
Try it yourselves….Problem 7-6
Step 1 – ADD ALL Debit Balances Step 2 – ADD ALL Credit Balances Step 3 – COMPARE THE TWO TOTALS
DO THEY EQUAL?????
Correcting Entries
“To err is human… but to really foul things up, you need a computer”
What does this quote mean to you?
How does it apply to accounting?
Mistakes Will Happen…
In accounting, if a mistake is made…there is only 1 single rule that applies….
Making Correcting Entries Depends…
When the error is made
Where the error is made
3 Types of Errors you will See
An Error in the journal (the entry has not yet been posted)
Journal Entry is correct, however you made a mistake while posting to the ledger
Error in a journal entry that has already been posted (both journal and ledger are incorrect)
What is wrong with the following example (error type 1)?
How would you correct it?
If you discover an error before posting!
Example: On January 1, Mrs. Nemec invested $52,000 to open up a business
called: “Nemec’s Accountants”
Date DescriptionPost
Ref Debit Credit
Jan 1 Cash in Bank $25,000
Mrs. Nemec, Capital $25,000
Correcting in the Ledger, if Journal Entry is correct
Date DescriptionPost
RefDebit Credit
Balance
Debit Credit
Jan 1 G1$25,000 $25,000
A Correcting “Entry” is made when…..
The journal entry has already been posted, however the journal entry is
incorrect
Imagine the Following Example:
On February 15, Nemec’s Accountants paid the monthly rent of $1,500
Rent Expense Cash in Bank
Debit Credit Debit Credit
$1,500 $1,500
However the Journal Entry that was recorded is…
Date DescriptionPost
Ref Debit Credit
Feb 15 Advertising Expense 405 $1,500
Cash in Bank 101 $1,500
Acct Name: Advertising Expense
Date DescriptionPost
RefDebit Credit
Balance
Debit Credit
Jan 1 G1 $20,000 $20,000
Feb 15 G2$1,500 $21,500
Acct Name: Rent Expense
Date DescriptionPost
RefDebit Credit
Balance
Debit Credit
Jan 15 G1 $2,000 $2,000
Make a Correcting “Journal” Entry First
Date DescriptionPost
Ref Debit Credit
Feb 15 Rent Expense 401 $1,500
Advertising Exp. 405 $1,500
Then Post your Correcting “Journal” Entries
Acct Name: Advertising Expense
Date DescriptionPost
RefDebit Credit
Balance
Debit Credit
Jan 1 G1 $20,000 $20,000
Feb 15 G2 $1,500 $21,500
Feb 15 Correcting Entry
G2 $1,500 $20,000
Acct Name: Rent Expense
Date DescriptionPost
RefDebit Credit
Balance
Debit Credit
Jan 15 G1 $2,000 $2,000
Feb 15 Correcting Entry
G2 $1,500 $3,500
Try it yourselves…
Problem 7.3 7.3 in your workbook & textbook
Check answers with me, then move on to Problem 7.4 and 7.9 7.4 and 7.9 in your workbook
Problem 7.3 Solution
Date DescriptionPost
Ref Debit Credit
May 10 Computer Equipment 120 $1,500
Cash in Bank 101 $1,500
Check 8099
20 Office Equipment 115 $1,500
Computer Equipment 120 $1,500
Memo 47
Account Name: Computer Equipment
Date DescriptionPost
RefDebit Credit
Balance
Debit Credit
May 1 Balance $3,000
10 G6 $1,500 $4,500
20Correcting
EntryG6 $1,500 $3,000
Account Name: Office Equipment
Date DescriptionPost
RefDebit Credit
Balance
Debit Credit
May 1 Balance $700
20Correcting
EntryG6 $1,500 $2,200