How to prepare balance sheet
4.2. Step 2: Obtain trial balance for your company
A trial balance is the collection of all accounts that exist in the company's chart of accounts with balances as of a particular date. Each account has either a debit or credit balance. The total of all debits equals the total of all credits (i.e. double-entry accounting system).
Most businesses, nowadays, use accounting software that is capable of generating a trial balance. Therefore, for your purposes, you can extract such a trial balance from your software. If you don't use such software, then you can prepare a trial balance from your records using, for example, MS Excel.
For our illustration, we obtained the trial balance from our accounting software as shown below:
Illustration 5: A trial balance extracted from accounting software
Your Company Name |
|||
Account |
Account Name |
Debit |
Credit |
1000 |
Petty Cash |
$ 500 |
|
1010 |
Chase Checking |
42,000 |
|
1020 |
PayPal Checking |
23,500 |
|
1030 |
Savings |
300,000 |
|
1040 |
Money Market |
25,000 |
|
1200 |
Marketable Securities |
0 |
|
1300 |
Accounts Receivable |
389,000 |
|
1350 |
Allowance for Doubtful Accounts |
25,500 |
|
1400 |
Raw Materials |
87,000 |
|
1410 |
Work-in-process |
12,000 |
|
1420 |
Finished Goods |
132,000 |
|
1430 |
Spare Parts |
58,000 |
|
1500 |
Prepaid Insurance |
5,400 |
|
1510 |
Prepaid Rent |
3,000 |
|
1600 |
Land |
570,000 |
|
1610 |
Buildings |
430,000 |
|
1620 |
Leasehold Improvements |
100,000 |
|
1630 |
Office Equipment |
44,000 |
|
1650 |
A/D-Buildings |
240,000 |
|
1660 |
A/D-Leasehold Improvements |
51,000 |
|
1670 |
A/D-Office Equipment |
25,000 |
|
1700 |
Patens |
170,000 |
|
1710 |
Trademark |
60,000 |
|
1750 |
Accum Amort-Parents |
90,000 |
|
1800 |
Investments in Debt Securities |
0 |
|
1810 |
Investments in Equity Securities |
75,000 |
|
1900 |
Cash Surrender Value Life Insr |
54,000 |
|
2000 |
Accounts Payable |
285,000 |
|
2100 |
Accrued Payroll |
205,000 |
|
2110 |
Accrued Property Taxes |
42,000 |
|
2120 |
Accrued Vacation |
323,000 |
|
2200 |
Short-term Bank Loan |
245,000 |
|
2300 |
Current Portion of Line of Credit |
100,000 |
|
2400 |
State Income Tax Payable |
30,000 |
|
2410 |
Federal Income Tax Payable |
60,000 |
|
2500 |
Line of Credit (Revolver) |
53,000 |
|
2510 |
Term Loan |
250,000 |
|
3000 |
Capital |
50,000 |
|
3010 |
Current Year Earnings |
159,000 |
|
3020 |
Retained Earnings |
346,900 |
|
Total |
$ 2,580,400 |
$ 2,580,400 |
|
Note that the total in the Debit column equals the total in the Credit column.
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