Accounts: Their Construction and Interpretation for Business Men and Students of Affairs

By William Morse Cole | Go to book overview

CHAPTER FIVE
THE TRIAL BALANCE, THE STATEMENT, AND THE BALANCE SHEET

BEFORE we pass on to a study of the various typical methods of abbreviating the labor of keeping records, it may be well to carry these simple forms to their conclusions in a trial balance, a six-column statement, and a balance sheet; for these last devices remain unchanged in spite of all the changes of method in making original entries, and an understanding of them is an assistance in understanding the methods of abbreviation.

It has been noted all along that debits must equal credits. When an entry has many parts, it is not surprising if some part be inadvertently lost. A simple test is to add together all the debits and then all the credits of that entry, and see whether the requirement of correspondence is met. The second journal entry for August 5, on page 31, is an illustration of a case in which the bookkeeper is likely to find satisfaction in making a test. It may be worth while simply to add the total of each journal column, one debit and one credit, page by page, on the presumption that if the comparison is correct for a page as a whole it is correct for each entry. Yet even if the journal correspondence holds true, that fact is no evidence that the correspondence will hold true on the ledger, for errors in posting are not always easy to avoid. A test of the ledger may also be made, however, and usually is made under the name of the "trial balance."

A trial balance is nothing but a list of the open accounts in the ledger with an extension opposite the name of each account showing the amount of debit or credit balance (or debit and credit total, if the bookkeeper finds it easier to write both totals than to figure the difference between them). For the ledger beginning on page 32, the trial balance would look as follows, --debits being here, as everywhere, in the left column and credits in the right:

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