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Welcome to's Accounting Tutor

How to Prepare Balance Sheet

After the year end or the end date at which you wan to prepare a balance sheet, make the trial from your ledger account.

What is Trial?

A trial balance is an accounting report that lists the balances in each of an organization's general ledger accounts

To prepare a trial balance, you or the accounting software will simply list the titles of all of the accounts in the general ledger that have balances. To the right of the account titles you will have two columns for entering each account's balance. One column is headed "Debit" and the other column is headed "Credit." List each account's balance in the appropriate column. Now make the total of each column. The total of all debit account should be same as all credit account. If there is difference then you have made a mistake while posting. It accounting software there is no chance of such mistake because you can't fill a journal voucher wrong.

Before preparing the trial balance alway tally accounts with the parties so that no entry is wrongly posted.

At the end of the year prepare a closing stock list and enter the value through a general Voucher. Make two accounts in ledger "Current Assets" and Closing Stock. Credit Closing stock the stock value and Debit the Current Assets. Current Assets are the part your balance sheet because Closing Stock is your Asset.

One More entry you are to make at the end of the year - It is Depreciation. Make a new account Depreciation. Now post a journal entry Credit Assets and debit Depreciation. The depreciation that you can claim is 15 on Machinery, 10% on Funiture and Fixtures and 60% on Computers.

Now you will make three accounting reports from this trial list.

1. Trading Account

2. Profit & Loss Account

3. Balance Sheet

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1. Trading Account is sale + Closing Stock - Purchase + Opening stock + Direct Expenses (direct expenses means the expenses made to bring that product to your premises, e.g., freight and octroi, loading, unloading).

The Trading Account is prepared to get the GROSS PROFIT.

2. Profit and loss account starts with the credit of Gross profit from the trading account and then all the indirect expenses are debited.

3. Balance Sheet

Balance Sheet is a financial statement that summarizes company's assets and liabilities.

Liabilities are Partner's Capital, Bank Loan, Unsecured Loans, Creditors, expenses payable.

Assets are Machinery, Car, Cash in Hand, Closing Stock, Bank Balances, Debtors, Securities and Advances.

In balance sheet partners capital is made after the net profit is added to capital account of each partner according to his/her share.

Now see the below charts how we have made the financial statements from a trial balance. We have taken creditors and debtors totoal figure in the trial balance to make the list smaller. Other wise in your list all the debtors and creditors will be listed party wise.

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