Unadjusted Trial Balance

A trial balance is a list of the balances of ledger accounts of a business at a specific point of time usually at the end of a period such as month, quarter or year.

An unadjusted trial balance is the one which is created before any adjustments are made in the ledger accounts.

The preparation of a trial balance is very simple. All we have to do is to list the balances of the ledger accounts of a business.

Example

Following is the unadjusted trial balance prepared from the ledger accounts of Company A.

Company A
Unadjusted Trial Balance
January 31, 2010
 
 DebitCredit
Cash$20,430 
Accounts Receivable5,900 
Office Supplies22,800 
Prepaid Rent36,000 
Equipment80,000 
Accounts Payable $5,200
Notes Payable 20,000
Utilities Payable 3,964
Unearned Revenue 4,000
Common Stock 100,000
Service Revenue 82,600
Wages Expense38,200 
Miscellaneous Expense3,470 
Electricity Expense2,470 
Telephone Expense1,494 
Dividend5,000 
Total$215,764$215,764

Since, in double entry accounting we record each transaction with two aspects, therefore the total of debit and credit balances of the trial balance are always equal. Any difference shall indicate some mistake in the recording process or in the calculations. Although each unbalanced trial balance indicates mistake, but this does not mean that all errors cause the trial balance to unbalance. There are few types of mistakes which will not unbalance the trial balance and they may escape un-noticed if we do not review our work carefully. For example, to omit an entry, to record a transaction twice, etc.

After the preparation of an unadjusted trial balance, adjusting entries are passed.

Written by Irfanullah Jan