How to Adjust a Trail Balance
How to Adjust Entries for a Trial Balance
A trial balance is created by companies at the end of an accounting period. It contains a list of all accounts within an accounting system that have balances. Companies separate the accounts into different categories, which include assets, liabilities, equities, revenues and expenses. The accounts are listed in order, beginning with assets, and each includes a balance that is either a debit or credit. Asset and expense accounts have debit balances, while the other types have credit balances. Adjusting entries are made to certain accounts to bring their balances up to date. After adjusting entries are made, the trial balance is updated to an adjusted trial balance.
Instructions 1. o 1
Create a trial balance. Using the company's general ledger, transfer all accounts and balances onto a 10-column worksheet. Each account name is listed first, followed by the balance in each. The first two columns of the worksheet are designated for the trial balance. The amounts are separated by debits and credits. Total each column verifying that the amounts are equal.
o 2
Determine what adjusting entries are needed. Adjusting entries typically are used for two different types of activities: accrual and deferrals. Accruals are entries used to record a revenue or expense that has occurred but has not been posted yet. Deferrals refer to entries that have been made previously, but the amount of the entry must be divided between two or more periods.
o 3
Adjust for accrual of expenses. Several common adjusting entries occur due to the accrual of expenses. According to Generally Accepted Accounting Principles (GAAP), all expenses and revenues are to be recorded in the period in which they occur. For example, you must record interest expense for interest accrued on a business loan during the current period. To do this, a debit is posted to Interest Expense and a credit to Interest Payable. Interest
A trial balance is created by companies at the end of an accounting period. It contains a list of all accounts within an accounting system that have balances. Companies separate the accounts into different categories, which include assets, liabilities, equities, revenues and expenses. The accounts are listed in order, beginning with assets, and each includes a balance that is either a debit or credit. Asset and expense accounts have debit balances, while the other types have credit balances. Adjusting entries are made to certain accounts to bring their balances up to date. After adjusting entries are made, the trial balance is updated to an adjusted trial balance.
Instructions 1. o 1
Create a trial balance. Using the company's general ledger, transfer all accounts and balances onto a 10-column worksheet. Each account name is listed first, followed by the balance in each. The first two columns of the worksheet are designated for the trial balance. The amounts are separated by debits and credits. Total each column verifying that the amounts are equal.
o 2
Determine what adjusting entries are needed. Adjusting entries typically are used for two different types of activities: accrual and deferrals. Accruals are entries used to record a revenue or expense that has occurred but has not been posted yet. Deferrals refer to entries that have been made previously, but the amount of the entry must be divided between two or more periods.
o 3
Adjust for accrual of expenses. Several common adjusting entries occur due to the accrual of expenses. According to Generally Accepted Accounting Principles (GAAP), all expenses and revenues are to be recorded in the period in which they occur. For example, you must record interest expense for interest accrued on a business loan during the current period. To do this, a debit is posted to Interest Expense and a credit to Interest Payable. Interest