Free Trial Balance Template
Free Excel Trial Balance Template Download, PDF, Guide and Instructions
A trial balance is an important financial report that businesses use to ensure the accuracy of their financial records.
A trial balance is a list of all the account titles and all the balances in a business’s general ledger accounts. For small businesses, having accurate trial balances can help them track their finances more effectively and accurately assess the overall financial health of their company.
Preparing a trial balance ensures that the debits equal the credits in the ledger, which means that the books are balanced. If the trial balance doesn’t balance, it indicates that errors in the ledger must be corrected.
In this article, we will look at what a Trial balance is, the trial balance format and how to correct mistakes. To assist in creating a trial balance, we have created both a free Excel template and PDF for download,
What is the Purpose of the Trial Balance
A trial balance is an essential step in the year-end accounting process. It is a way of checking that the total of all the debit balances in the ledger matches the total of all the credit balances.
The trial balance also provides a valuable tool for identifying errors in the ledger. If the debit and credit column totals do not match, this can indicate that some errors need to be corrected.
By carefully checking the trial balance, businesses can ensure that their accounting year-end is accurate and up-to-date.
Double Entry System
The double entry system is the cornerstone of modern accounting. Under this system, every transaction is recorded as a debit and a credit and must be balanced. It helps to ensure accuracy and prevent errors.
This system has been used for centuries and is still the most popular method of accounting today.
What is the Trial Balance Format?
The trial balance is simple to read due to the layout of the report.
Typically the report will have a header showing the business name and the date the figures are for.
It will then have either three or four columns which include:
- Account number – not used on all accounting software
- Account name
- Debit and credit column
- Total of debit and credit column
Below is an example of a typical trial balance format.
How to Prepare a Trial Balance for Your Small Business
Preparing a trial balance is relatively simple, especially if you have a small business with only a few accounts. Here’s a step-by-step guide to help you prepare a trial balance for your small business.
1. Gather Your Financial Documents
The first step is gathering your financial documents, such as your income statement, balance sheet, and general ledger. You’ll need these documents to determine which accounts must be included in the trial balance.
If you are using a manual system, you must gather the figures from your system. The trial balance is then used to create the reports.
2. Create a List of Accounts
Once you have your financial documents, you can create a list of all the accounts in your general ledger. This list should include both asset and liability accounts, as well as income and expense accounts. Make sure to include the current balances for each account. The list can ignore any accounts that have a zero balance.
3. Verify That the Debit and Credit Columns Balance
The trial balance must have a debit column and a credit column, which must be balanced. To verify that the columns are balanced, add all the debit balance amounts and compare them to the total credit balance amounts. If the columns are in balance, you can proceed to step 4.
If they don’t match, go back and check your math or look for any errors in your financial documents.
We’ve created a free trial balance template that you can use to prepare a trial balance for your small business; enter your account information into the template, and our spreadsheet will do the rest!
4. Review Your Trial Balance Statement
Reviewing your trial balance is essential to ensure that your books are still in order and that no errors must be corrected. We recommend checking your trial balance at least once a month but more often if you have frequent transactions or complex finances.
5. Prepare the Financial Statements
Once you are happy with the trial balance, it is time to enter the figures into the financial statements. The three primary financial statements are the balance sheet, income statement, and cash flow statement.
Start by splitting the trial balance into two sections for the balance sheet and income statements and transfer the account balances to each.
Balance Sheet
The balance sheet is one of a business’s most important financial statements. It provides a snapshot of the company’s assets and liabilities at a given time, which can be used to assess the business’s financial health.
The assets section of the balance sheet lists all the company’s resources, including cash, inventory, and property. The liabilities section lists all company debts and obligations, including loans and accounts payable. The equity section represents the ownership interest of the shareholders.
These three sections provide a clear picture of the company’s financial position.
Income Statement
A Profit and Loss (income statement) is a financial statement that shows a company’s revenue and expenses for a period of time. The income statement can be prepared monthly, quarterly, or annually.
The income statement accounts aim to see if the business has made a profit or loss. The information can be used for the following:
- If any price changes need to be made.
- Look at reductions in expenses.
- Investors.
- Year-end accounts.
- Bank loans and overdrafts.
Trial Balance and the Accounting Cycle
The trial balance is part of the accounting cycle and includes the following stages.
- Prepare a trial balance
- Review the accounts and make any adjustment entries
- Create a post-closing trial balance; these figures are used as the opening balances for the new period.
Instructions for Trial Balance Template
Use the link below to download your free trial balance template. The template can be used with Microsoft Excel, Google sheets and other versions of spreadsheet software.
At the top, enter the business’s name and the date for which the trial balance is prepared for.
List all accounts with account balances, starting with the assets, liabilities, equity, dividends, revenues, and expenses.
Enter the closing balances of each account, ensuring that the figures are in the correct columns.
Once all the balances are entered check, the debit balance equals the credit balance. To help with this, we have added a formula showing the difference.
How to Find Differences
When creating a manual trial balance, it is easy to make mistakes. Mistakes can be difficult to spot, but here are some tips for reviewing the report.
- Divide the difference by 2; if this is one of your figures, the chances are you have mixed up a debit and credit.
- If the difference divides by 9, 90, or 900, you may have got 2 numbers round the wrong way, e.g. 87 for 78.
- If neither of the above works, double-check, as you’ve probably missed or got the wrong number.
Free Trial Balance Template Download
By downloading our free trial balance template, you agree to our licence agreement, allowing you to use the templates for your own personal or business use only. You may not share, distribute, or resell the templates to anyone else in any way.
Trial Balance PDF
If you prefer a blank PDF, please use the link below:
Trial Balance Spreadsheet Conclusion
A trial balance is an essential tool for small businesses because it ensures that debit balances equal credit balances – in other words, that the books are balanced.
Preparing a trial balance is relatively simple, especially if you have a small business with only a few accounts. Using Accounting software or trial balance templates will make the process easier.
Following these steps, you can easily prepare a trial balance for your business: gather your financial documents, create a list of accounts, verify that debits equal credits, prepare the trial balance sheet, and review your trial balance periodically.
