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Q. Preparing a separate trial balance?
As an alternative of preparing a separate trial balance as accountants uses the Trial Balance columns on a work sheet. The numbers and titles of the ledger accounts of Micro Train Company are on the left portion of the work sheet. Habitually only those accounts with balances as of the end of the accounting period are listed. Some accountants do catalogue the entire chart of accounts even those with zero balances. Suppose you are Micro Train's accountant. You catalogue the Retained Earnings account in the trial balance even though it has a zero balance to (a) show its relative position among the accounts and (b) indicate that December 2010 is the first month of operations for this company. Subsequently you enter the balances of the ledger accounts in the Trial Balance columns. The accounts are in the direct in which they appear in the general ledger assets, liabilities, stockholders' equity, dividends, revenues and expenses. After that total the columns. If the debit and credit column totals aren't equal an error exists that must be corrected before you proceed with the work sheet.
As you learned adjustments bring the accounts to their proper balances before accountants prepare the income statement, balance sheet and statement of retained earnings. You enter these adjustments in the Adjustments columns of the work sheet as well you cross reference the debits and credits of the entries by placing a key number or letter to the left of the amounts. This key number makes easy the actual journalizing of the adjusting entries later because you do not have to rethink the adjustments to record them. For instance the number (a) identifies the adjustment debiting Insurance Expense and crediting Prepaid Insurance. Note in the Account Titles column that the Insurance Expense account title is below the trial balance totals because the Insurance Expense account didn't have a balance before the adjustment and, therefore, did not appear in the trial balance.
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