FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:### Financial Accounting: Understanding Trial Balances
In this section, we will explore the concept of trial balances through an example from Garry's Tree Service. A trial balance is a bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns. This entry will give you a visual understanding of how trial balances appear and function in practical applications.
#### Sample Data from Garry's Tree Service
Below are several account entries that you might encounter in a trial balance:
- **Rent Expense:** 11,500
- **Unearned Revenue:** 1,500
- **Accumulated Depreciation—Machinery:** 7,340
- **Prepaid Rent:** 12,200
- **Dividends:** 3,300
#### Garry's Tree Service Trial Balance
The following diagram represents how these and other account balances are laid out in a trial balance:
```
Garry's Tree Service
Trial Balance
Accounts | Debit Balances | Credit Balances
--------------------------------------------------------------
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
```
#### Explanation of Columns
- **Accounts:** This column lists various accounts that Garry’s Tree Service maintains, including those mentioned above (Rent Expense, Unearned Revenue, etc.)
- **Debit Balances:** This column shows the balances that are in debit.
- **Credit Balances:** This column shows the balances that are in credit.
A well-prepared trial balance is essential for ensuring that total debits and credits are equal, which supports the accuracy of the double-entry bookkeeping system. Each account's balance, be it a debit or credit, is filled in appropriate columns as illustrated.
By understanding these fundamental aspects of trial balances, you will be better prepared to handle more complex financial records and statements in the world of accounting.
### Practice Exercise
Using the sample data provided, fill out the appropriate debit and credit balance columns. Compare your results with the provided sample to assure accuracy. Understanding and preparing trial balances will become a straightforward task with practice and practical application.
Transcribed Image Text:**Title: Preparing a Trial Balance for Garry's Tree Service**
**Objective:**
To understand how to prepare a trial balance using the account balances for Garry's Tree Service.
**Instruction:**
Using the following account balances for Garry's Tree Service, prepare a trial balance. If a box does not require an entry, leave it blank.
**Account Balances:**
- Cash: $25,000
- Supplies: $1,000
- Accounts Payable: $7,000
- Common Stock: $32,910
- Wage Expense: $2,000
- Machinery: $18,350
- Wages Payable: $3,600
- Service Revenue: $21,000
- Rent Expense: $11,500
- Unearned Revenue: $1,500
- Accumulated Depreciation—Machinery: $7,340
- Prepaid Rent: $12,200
- Dividends: $3,300
------------------------------------------------------
### Garry's Tree Service
### Trial Balance
------------------------------------------------------
| Accounts | Debit Balances | Credit Balances |
|-----------------------------------|----------------|-----------------|
| Cash | | |
| Supplies | | |
| Accounts Payable | | |
| Common Stock | | |
| Wage Expense | | |
| Machinery | | |
| Wages Payable | | |
| Service Revenue | | |
| Rent Expense | | |
| Unearned Revenue | | |
| Accumulated Depreciation—Machinery| | |
| Prepaid Rent | | |
| Dividends | | |
**Instructions for Students:**
1. List all account names in the "Accounts" column.
2. Enter the corresponding debit balances in the "Debit Balances" column and credit balances in the "Credit Balances" column.
3. Ensure the total of the debit balances equals the total of the credit balances to verify the accuracy of the trial balance.
**Note:**
- Debit balances are typically assets, expenses, and dividends.
- Credit balances are usually liabilities, revenues, and equity accounts (such as common stock).
**Example:**
- Cash: $25,000 (Debit)
- Accounts Payable: $7,000 (Credit)
-
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