Working trial balance definition
/What is a Working Trial Balance?
A working trial balance is a trial balance that is in the process of being adjusted. In concept, it is an unadjusted trial balance, to which is added any adjusting entries needed to close a reporting period (such as for the monthly, quarterly, or annual financial statements). These additional entries are then entered in the general ledger, resulting in a completed trial balance. The working trial balance is useful for testing a complete set of adjusting entries to determine their impact on the financial statements, before actually making the entries in the general ledger.
How to Use a Working Trial Balance
The steps required to use a working trial balance (assuming the existence of an accounting software package) are as follows:
Print the current version of the ending trial balance, or (better yet) convert the report to an electronic spreadsheet.
Enter all adjusting entries needed to close the month.
Note the descriptions and calculations for each adjusting entry at the bottom of the report, so that you will understand the nature of each entry.
Carry forward the adjusted account balances to the right side of the report and manually translate them into the income statement and balance sheet.
Revise the adjusting entries as needed, based on the preliminary financial statement results. This is quite likely, since it may take several iterations to prepare a satisfactory set of financial statements.
Create journal entries for each entry made in the working trial balance, and enter them in the general ledger, along with explanations. Be sure to have a senior accountant verify and approve each one beforehand.
Print the trial balance again, and verify that all entries were made to the correct accounts and in the correct amounts.
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The Contents of a Working Trial Balance
The columns used in a working trial balance (in order from left to right) are:
Account number
Account name
Ending debit total
Ending credit total
For manual entries: Blank space for debit entries
For manual entries: Blank space for credit entries
For financial statements: Blank space to enter income statement and balance sheet totals
FAQs
Is a Working Trial Balance Included in the Financial Statements?
A working trial balance is not included in the financial statements. It is an internal accounting document used by accountants to organize and adjust account balances before preparing the financial statements. Its main purpose is to ensure that total debits equal total credits and to help compile accurate financial reports, but it is never published or shared externally.
Can a Working Trial Balance Be Derived from a Single Entry System?
A working trial balance cannot be properly derived from a single entry system. A single entry system only records one side of a transaction, usually focusing on cash receipts and disbursements, without tracking full debits and credits. Because a working trial balance requires a complete set of double-entry records, where every debit has a corresponding credit, you cannot prepare it from incomplete single-entry data.
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