Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 2-5

Purpose:

(L.O. 7) This exercise will (1) illustrate how to prepare a trial balance, and (2) will discuss the reasons for preparing a trial balance.

A trial balance is prepared after all transactions have been posted from the journal to the ledger.

Instructions

Use the Solution to Exercise 2-4 and do the following:

1. Balance each account in the ledger.
2. Prepare a trial balance.
3. Describe a trial balance and list reasons why it is to be prepared.

TIP: To balance a T-account, a balancing line is to be drawn in the T-account; the balance is entered beneath that line on the side of the account which has the largest total. (An account balance is determined by totaling the debits and totaling the credits and taking the difference between those two totals.) If an account has only one entry in it, no balancing line is needed because that one entry readily establishes the account's balance.