From the course: Advanced Bookkeeping Techniques
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Using a trial balance to prepare a balance sheet
From the course: Advanced Bookkeeping Techniques
Using a trial balance to prepare a balance sheet
- From a trial balance, we can easily prepare a balance sheet and an income statement. The trial balance, a detailed internal document, provides all the raw material from which the summary financial statements are prepared. Here is the trial balance for Open Company. Keep in mind that this is a simple example. In a real company, there would be hundreds of accounts. For example, in the accounting system of a real company, the single wage expense number could be broken down into wage expense numbers by department, by geographical location, by product line and so forth. All right, let's make the income statement first. An income statement is a report showing a company's revenues and expenses. Here's the income statement for Open Company. Now let's think back on the entire accounting process. First, transactions happen. We analyze them and we make debit and credit journal entries. At the end of the year, we do more…
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