Trial Balance Worksheet
Financial Statements
Trial Balance Worksheet
A Trial Balance/Worksheet that we discussed earlier is prepared from the General Ledger. The balances are taken from the General Ledger and listed in this Trial Balance Worksheet in the order of the accounting equation.
Asset balances are listed first; followed by Liabilities; and then Owner’s Equity (“Ma Capital”); and finally her “kids” Revenues and Expenses.
Once you have a Trial Balance it’s simply a matter of transferring the amounts from the Trial Balance to use to prepare the Balance Sheet, Income Statement, and Capital Financial Statements. Add in the prior year’s balance sheet and you have the information needed for preparing the Cash Flow Statement.
ABC Trial Balance
| ABC Mowing | |||
| Trial Balance Year End | |||
| Account | Debit Balances | Credit Balances | Account Type |
| Asset Accounts | |||
| Cash | 5080 | Balance Sheet | |
| Accounts Receivable | 1600 | Balance Sheet | |
| Inventory-Office Supplies | 100 | Balance Sheet | |
| Mowing Equipment | 12500 | Balance Sheet | |
| Liability Accounts | |||
| Accounts Payable | 2060 | Balance Sheet | |
| Note Payable-Bank | 10000 | Balance Sheet | |
| Equity Accounts | |||
| Owner's Capital | 7500 | Balance Sheet | |
| Owner's Draws | 1100 | Balance Sheet | |
| Revenue Accounts | |||
| Mowing Revenue | 1205 | Income Statement | |
| Expense Accounts | |||
| Mulch Expense | 160 | Income Statement | |
| Advertising Expense | 225 | Income Statement | |
| Totals | 20765 | 20765 | |
It should be apparent that by having the information from the General Ledger and the Trial Balance one can readily prepare the Balance Sheet, Income Statement, and Capital financial statements.
The Trial Balance/Worksheet normally contains additional columns for adjusting and closing entries.
Briefly, closing entries transfer (close) the balances in the General Ledger’s individual revenue, expense, and drawing account(s) to the owner’s capital account at the end of a period (usually year end) which results in the same General Ledger Capital Account ending balance as contained in the Capital Statement. This Ending Capital balance becomes the new Beginning Capital Balance for the new year.
All the revenues, expense, and drawing account balances are reset to zero so that their balances will only represent transaction amounts (increases and decreases to owner’s equity) in the new year.
The Statement that determines whether a business
had a Profit or a Loss - Income Statement