Businesses use trial balance sheets to calculate the monthly debits and credits posted in their general ledgers. Debits are the money a business spends or loses, while credits are the money a business makes. The trial balance sheet totals the debit and credit balances in each ledger category to see if they balance. You can manage your companys accounting by using Excel to create a trial balance sheet and to post entries.
- The debits and credits on a trial balance come from entries posted in a company's general ledger. A general ledger tracks a companys debits and credits in categories such as cash, capital, accounts receivable, accounts payable and inventory. Before you create a trial balance sheet, determine the balances of each of your company's general ledgers. For example, your accounts receivable ledger may have a debit entry of $5,000 posted on December 12th. When you receive a payment of $2,500 on December 20th, you post that payment as a credit entry. The balance of the ledger is $2,500, which is the amount youd list on your trial balance in the debit section, as money still owed to your company.
Example Trial Balance Totals
- Once youve calculated all of the balances from your various general ledgers, use those numbers to begin creating your trial balance sheet entries in Excel. Your general ledger balances may be $10,000 in cash, $2,500 for accounts receivables and $3,000 for inventory. These entries appear as debits. Your credit entries might include $2,500 for accounts payable, $4,000 in capital and $9,000 in revenue. The balances for both the debit and credit side equal $15,550.
- Use a blank Excel worksheet to create a trial balance sheet. In row A, add the titles for each column: Account Name/Title, in column A, Debit, in column B and Credit in column C. Under Account Name/Title, list each of the accounts in your ledger. The previous examples includes cash, accounts receivables, inventory, accounts payable, capital and revenue. Add the balances of each of your ledgers to the appropriate debit and credit columns for each account. If one of your balances is a negative number, enter a "-" sign before the number, when you input the entry. This tells Excel to subtract the number when it totals the column. Make your entries display as currency by highlighting the numbers, then click Format on the Excel menu. Select the Number tab, then click Currency and select the dollar sign. Click on the first empty cell in the Debit column, then select the AutoSum button, which selects all of the numbers in the column for the total. Repeat for the Credit column. If the the debit total equals the credit totals, then the totals match whats on the general ledgers.
Limitations of Trial Balance
- Trial balances have several limitations, even when the debit and credit totals balance. Limitations such as when transactions that are omitted from the ledger, are omitted from the trial balance, and when entries are listed under the wrong ledger, errors may occur. If the balances do not match, check that you included every balance from every general ledger, ensure that all general ledger totals appear on your trial balance and that you didnt introduce typos, such as adding a digit or eliminating a digit. You may also get mismatched balances if a number is in the "debit" column, when it should appear in "credit," and vice versa.