basics-of-accounting-information-processing

Agilent technologies inc 2012 us 1 800 829 4444 canada

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Unformatted text preview: a listing of the ledger accounts along with their respective debit or credit balances. The trial balance is not a formal financial statement, but rather a self-check to determine that debits equal credits. Following is the trial balance prepared from the general ledger of Xao Corporation. 9. The Trial Balance X AO CORPORATION Trial Balance January 31, 20X3 Debits * * Cash A ccounts receivable L and A ccounts payable N otes payable Capital stock Service revenues A dvertising expense U tilities expense Credits $26,300 3,200 15,000 2,000 1,000 $47,500 $ 500 10,000 25,000 12,000 $47,500 9.1 Debits Equal Credits Since each transaction was journalized in a way that insured that debits equaled credits, one would expect that this equality would be maintained throughout the ledger and trial balance. If the trial balance fails to balance, an error has occurred and must be located. It is much better to be careful as 9.1 Debits Equal Credits you go, rather than having to go back and locate an error after the fact. You should also be aware that Since each transaction was journalized in a way that insured that debits equaled credits, one would a “balanced” trial balance is no guarantee of correctness. For example, failing to record a transaction, expect that this equality would be maintained throughout the ledger and trial balance. If the trial recording the same transaction twice, or posting an amount to the wrong account would produce a balance fails to balance, an error has occurred and must be located. It is much better to be careful as balanced (but incorrect) trial balance. you go, rather than having to go back and locate an error after the fact. You should also be aware that a “balanced” trial balance is no guarantee of correctness. For example, failing to record a transaction, recording the same transaction twice, or posting an amount to the wrong account would produce a balanced (but incorrect) trial balance. Download free eBooks at bookboon.com 41 Basics of Accounting & Information Processing The Trial Balance 9.2 Financial Statements From the Trial Balance In the next chapter you will learn about additional adjustments that may be needed to prepare a truly correct and up-to-date set of financial statements. But, for now, you can probably see that a tentative set of financial statements could be prepared based on the trial balance. The basic process is to transfer amounts from the general ledger to the trial balance, then into the financial statements: * In reviewing the following financial statements for Xao, notice that blue italics were used to draw attention to the items taken directly from the trial balance above. The other line items and amounts simply relate to totals and derived amounts within the statements. These statements would appear as follows: XAO CORPORATION Income Statement For the Year Ending January 31, 20X3 Revenues S ervices to customers Expenses A dvertising U tilities XAO CORPORATION Balance Sheet January 31, 20X3 $12...
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This document was uploaded on 09/24/2013.

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