The trial balance is a summary of all the transactions of the company for the accounting period, usually twelve months.  It is the key document that links all the records of the company to the accounts. To prepare one, download the extended trial balance spreadsheet in the Preparation of Accounts section and edit the detail as applicable to your business.

The trial balance can be prepared using spreadsheets or software packages such as Sage, and is used to prepare the annual statutory accounts and monthly/quarterly management accounts. Once you hand your trial balance to a Chartered Accountant, it is usually coded into a spreadsheet by the accountant, or a software package such as Viztopia or Caseware, which produces annual accounts for filing automatically from the trial balance. The annual accounting journals are added.  In a spreadsheet, they appear in a separate column extending the spreadsheet to produce the final trial balance which can be automatically linked into the statutory financial statements.

A working paper file is produced by an accountant to support the figures in the trial balance, as a permanent company record. Clients of accountancy firms never see this file as accountants keep it for their records of work performed for clients. It is a good idea to prepare a file for accountants, and ask them to supply the adjustments once they have completed the accounts, as these adjustments need to be posted on the internal software of the company, so that the final accounts agree to the opening balances of the accounting records for the following year. It will also save money on accounts preparation fees, as the highest portion of costs charged by accountants is the labour for preparation of the extended trial balance, statutory financial statements and the year end file. This is true for companies who require an audit and those that do not.

The notes below set out the procedures to follow, but the downloadable spreadsheet mentioned above is the best example to follow. 

1. Print the trial balance that lists a year to date total of each major class of receipts and payments of your business for the current year and the prior year.

2. The extended trial balance below summarises how the software has merged the data you have entered to create the trial balance. Use it to find the source of errors that may have occurred if your accounts do not reconcile to the supporting documents in the trial balance column of our summary below.

Checklist

1. Ensure the trial balance total is zero, so that the debits equal the credits. If they do not, your software has not been set up correctly and you should contact the supplier of the software or your accountant to correct the error before any further work is prepared.

2. Agree customer control to the debtor's aged analysis that has been agreed to the customer statements.

3. Agree supplier control to the creditor's aged analysis that has been agreed to the supplier statements.

4. Agree a credit VAT balance in the trial balance to your payment due to the Vat office and a debit VAT balance to the receipt you expect from the VAT office for the period, whichever case is relevant.

5. Agree the bank line in the trial balance column to the cashbook total of the bank summary.

6. Each spreadsheet column below refers to a source document and shows the entries that are made to create the trial balance.  The final column shows what the closing trial balance figure should agree to or represent.  Ensure that the debits and credits in each column equal zero, so that all the debits = all the credits. Enter credits with a leading minus and debits as a positive figure

	List of sales invoices	Receipts	List of purchase invoices	Payments		Money owed to you	Trial balance
				Bank	Cash	Bad debt
Turnover	Cr(Net)						Agree to sales list net (Cr)
Direct costs			Dr net cost				Agree to purchase list net (Dr)
Light & Heat			Dr net cost				Agree to purchase list net (Dr)
Prof fees			Dr net cost				Agree to purchase list net (Dr)
Tools				Dr net cost	Dr net cost		Agree to bank payments net (Dr)
Wages				Dr Gross plus Eer's NI from payrol (no VAT)			Agree to bank payments net (Dr)
Cleaning					Dr net		Agree to cash payments net (Dr)
Trains					Dr net		Agree to cash payments net (Dr)
Bad debt						Dr Net	Money owed to you (Dr)
Customer control	Dr gross	Cr (From   customers)				Cr(Gross)	Agree to money owed to you (Dr)
Supplier control			Cr (gross)	Dr Gross paid to suppliers			Agree to money owed by you (Cr)
VAT   control	Cr(VAT)	Cr (From VAT office)	Dr VAT	Dr VAT	Dr VAT	Dr VAT	Agree to VAT received (Dr) or paid (Cr) after the year end
Bank control		Dr (from bank statements and deposit books)		Cr (from bank statemetns)			Agree to cashbook balance on bank reconciliation in extended trial balance
Cash control				Dr gross Cash drawn	Cr (Gross)		Agree to cash left over (ETB)

 

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