Fundamentals of accounting
Fundamentals of accounting

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Fundamentals of accounting

4.3 The trial balance

If (a) all the double entries for the six transactions for Edgar Edwards were correctly recorded in the relevant T-accounts and (b) all the relevant T-accounts were correctly balanced off, then a correct trial balance for Edgar Edwards can be prepared.

This will be shown in the next activity.

Activity 2 Preparing a correct trial balance

Complete the trial balance below. Your answer should have the correct debit or credit balance for each of the relevant six accounts as well as the total for all debit and credit balances.

Edgar Edwards Enterprises

Table 1 Completion of trial balance

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Answer

Table 1 Completion of trial balance

DebitCredit
££
Bank9,150
Furniture400
Computer600
Bank loan5,000
Pearl Ltd (a payable)200
Capital______Total 4,950
Total 10,150Total 10,150

From the trial balance it can be seen that the total of debit balances equals the total of credit balances. This demonstrates that for every transaction the basic principle of double-entry accounting has been followed – ‘for every debit there is a credit’.

In the final section of this week we will go back to our accounting equation to show that the balances from the trial balance can be used to prepare the balance sheet.

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