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Section 3: Preparing a Trial Balance Enduring Understandings:
The trial balance is proof that total debits = total credits in the
ledger.To error is human. Essential Questions:How do you prepare a
trial balance?How do you find and correct errors in the trial
balance?
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Section 3: Preparing a Trial Balance Objectives: Demonstrate how
to prepare a trial balance.Analyze business transactions using
prior knowledge of the four steps and the rules to debits and
creditsJournalize and post business transactions
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Section 3: Preparing a Trial Balance Objectives: Locate and
identify journal entries that are incorrect
Use proper accounting principles to correct the wrong journal
entries using the three methods
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What is the purpose of a Trial Balance? A formal way to prove
the ledger. Fifth step in the accounting cycle After all journal
entries have been posted to the accounts in the general ledger
.
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What is the purpose of a Trial Balance?Step 1 ADD ALL Debit
BalancesStep 2 ADD ALL Credit BalancesStep 3 COMPARE THE TWO
TOTALSDO THEY EQUAL?????
This is called.PROVING THE LEDGER!
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Try it yourselves.Problem 7-6Step 1 ADD ALL Debit BalancesStep 2
ADD ALL Credit BalancesStep 3 COMPARE THE TWO TOTALSDO THEY
EQUAL?????
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Correcting EntriesTo err is human but to really foul things up,
you need a computer
What does this quote mean to you?How does it apply to
accounting?
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Mistakes Will HappenIn accounting, if a mistake is madethere is
only 1 single rule that applies.
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Making Correcting Entries DependsWhen the error is made
Where the error is made
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3 Types of Errors you will SeeAn Error in the journal (the entry
has not yet been posted)
Journal Entry is correct, however you made a mistake while
posting to the ledger
Error in a journal entry that has already been posted (both
journal and ledger are incorrect)
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What is wrong with the following example (error type 1)?How
would you correct it?
If you discover an error before posting!
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Example: On January 1, Mrs. Nemec invested $52,000 to open up a
business called: Nemecs Accountants
DateDescriptionPost RefDebit CreditJan1Cash in Bank$25,000 Mrs.
Nemec, Capital$25,000
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Correcting in the Ledger, if Journal Entry is correct
DateDescriptionPost RefDebitCreditBalanceDebit
CreditJan1G1$25,000$25,000
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A Correcting Entry is made when..The journal entry has already
been posted, however the journal entry is incorrect
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Imagine the Following Example:On February 15, Nemecs Accountants
paid the monthly rent of $1,500 Rent ExpenseCash in
BankDebitCreditDebitCredit$1,500$1,500
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However the Journal Entry that was recorded is
DateDescriptionPost RefDebit CreditFeb15Advertising
Expense405$1,500 Cash in Bank101$1,500
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Acct Name: Advertising Expense
DateDescriptionPost RefDebitCreditBalanceDebit
CreditJan1G1$20,000$20,000Feb15G2$1,500$21,500
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Acct Name: Rent Expense
DateDescriptionPost RefDebitCreditBalanceDebit
CreditJan15G1$2,000$2,000
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Make a Correcting Journal Entry First
DateDescriptionPost RefDebit CreditFeb15Rent Expense401$1,500
Advertising Exp.405$1,500
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Then Post your Correcting Journal Entries
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Acct Name: Advertising Expense
DateDescriptionPost RefDebitCreditBalanceDebit
CreditJan1G1$20,000$20,000Feb15G2$1,500$21,500Feb15Correcting
EntryG2$1,500$20,000
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Acct Name: Rent Expense
DateDescriptionPost RefDebitCreditBalanceDebit
CreditJan15G1$2,000$2,000Feb15Correcting EntryG2$1,500$3,500
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Try it yourselvesProblem 7.3 in your workbook & textbook
Check answers with me, then move on to Problem 7.4 and 7.9 in
your workbook
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Problem 7.3 Solution
DateDescriptionPost RefDebit CreditMay10Computer
Equipment120$1,500 Cash in Bank101$1,500 Check 809920Office
Equipment115$1,500 Computer Equipment120$1,500 Memo 47
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Account Name: Computer Equipment
DateDescriptionPost RefDebitCreditBalanceDebit CreditMay1Balance
$3,00010G6$1,500$4,50020Correcting EntryG6$1,500$3,000
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Account Name: Office Equipment
DateDescriptionPost RefDebitCreditBalanceDebit CreditMay1Balance
$70020Correcting EntryG6$1,500$2,200
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