Accounting: The Language of Business - Vol. 2 (Intermediate: Part 28)

The wild life of today is not ours to do with as we please. The original stock was given to us in trust for the benefit both of the present and the future. We must render an accounting of this trust to those who come after us.

Theodore Roosevelt

Review of the Accounting Cycle (Part E)

by

Charles Lamson

Step 4: Prepare the Unadjusted Trial Balance

Throughout the accounting cycle, companies prepare several trial balances. A trial balance is a listing of the accounts and their ending debit or credit balances at a point in time. The accounts are listed with the balance sheet accounts first (assets, liabilities, and stockholders' equity), followed by dividends and the income statement accounts (revenues, games, expenses, and losses).

The trial balance provides a check on the recording process by ensuring the equality of debits and credits; however, it does not prove the accuracy of the recording process. Debits can equal credits while numerous errors exist. For example, a trial balance will not reveal the following errors:

• A transaction that is not journalized.

• The correct journal entry that is not posted.

• An entry that is posted twice.

• The debiting of crediting of  incorrect accounts.

• The debiting or crediting of incorrect dollar amounts.

After completing the posting process, the company prepares the unadjusted trial balance, an initial listing of all accounts and their debit or credit balances. Note that an unadjusted trial balance may not reflect all of a company's events and transactions, because it has not made the adjusting journal entries at the time it prepares the unadjusted trial balance. For example, if equipment has not been depreciated throughout the accounting period, an adjusting entry to record depreciation in the current period will be recorded after the unadjusted trial balance is prepared. Example 4.4 illustrates preparing an unadjusted trial balance.

EXAMPLE 4.4 Unadjusted Trial Balance 

PROBLEM: Using the information in Example 4.3 from part 27, prepare an unadjusted trial balance for Plush Service Company Corporation. 

SOLUTION: We take the ending balances in each of the accounts from the solution to Example 4.3 from part 27 to prepare the trial balance, as presented here:

                                              

*GORDON, RAEDY,SANNELLS, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., P. 105*

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