Business Accounting Assignment: Trial Balance and Entries

This document presents a comprehensive solution to a business accounting assignment, meticulously addressing key concepts such as trial balances, adjusting journal entries, and closing journal entries. The assignment delves into the significance of trial balances in detecting errors and ensuring the accuracy of financial records, highlighting their role in both manual and computerized accounting systems. It further explores the purpose and application of adjusting journal entries in aligning accounting records with the accrual basis of accounting, ensuring that revenues and expenses are accurately reflected in the correct accounting periods. The document also examines the adjusted trial balance, its function in correcting errors and preparing financial statements, and its role in facilitating the construction of essential financial reports like the balance sheet and statement of cash flows. Furthermore, the solution differentiates between adjusting and closing journal entries, emphasizing their distinct roles in the accounting cycle. References from various accounting textbooks and journals are included to support the analysis.

Running head: BUSINESS ACCOUNTING
Business Accounting
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Step 2...............................................................................................................................................2
Step 3...............................................................................................................................................3
Step 4...............................................................................................................................................4
Step 5...............................................................................................................................................5
Step 6...............................................................................................................................................5
Step 7...............................................................................................................................................7
Answer to Question 1..................................................................................................................7
Answer to Question 2..................................................................................................................8
Answer to Question 3..................................................................................................................9
Answer to Question 4................................................................................................................10
References......................................................................................................................................12

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Step 2
Adjustment Journal Entries

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Step 3
Complete Worksheet

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Step 4
Income Statement

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Step 5
Closing Journal Entries
Step 6
Statement of Change in Equity

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Balance Sheet

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Step 7
Answer to Question 1
Trial Balance refers to bookkeeping or accounting report that includes the balances of
each ledger account of the companies. There are two columns in a trial balance; one of debit
balances and another is credit balances. Under the manual system of accounting, accountants
prepare the trial balance so that they can discover any kind of errors while posting the entries
(Weygandt, Kimmel and Kieso 2015). Thus, it can be seen that that trial balance plays an
integral part in the accounting of the companies. In the recent era, the introduction of various
bookkeeping and accounting software has almost eliminated the possibility of errors in positing
the transactions. Still the auditors and accountants consider trial balance of great importance in
case they want to check the account balances of general ledger before the necessary adjustments
(Needles, Powers and Crosson 2013).
It needs to be mentioned that certain specific reasons lead to the preparation of trial
balances for the companies. These reasons are discussed below:
 There are numerous instances where the accountants to the transportations mistakes at
the time of doing the double entries. However, with the help of trial balance, these errors
can be identified. In this process, it is required to divide the difference between the debit
side and credit side of trial balance by 9 and it will find the error of transportation.
 Calculation errors can be seen while posting the journal entries and ledger accounts and
trial balance helps the accountants to find these kinds of errors. These errors may take
place due to the poor calculation power of the accountants (Edmonds et al., 2013).

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 Trial balance plays an integral part in the detection of duplication errors in the financial
statements of the companies. There are many instances where the accountants write an
ledger balance two times and due to this, the trial balance will not match. For this
reason, it is required for the preparation of trial balance for the companies.
 With the help of trial balance, the accounts become able to identify the omission errors
in the posting of ledger balances. In the presence of this error, the trial balance of the
companies will not match (Horngren et al., 2012).
Thus, from the above discussion, it can be seen that the trial balance helps the accountants
in finding different types of errors in the financial statements. For all these reason, it is required
for the companies to prepare trial balances.
Answer to Question 2
Adjustment Journal Entries are considered as an important part of the accounting process
of the companies. The adjustments journal entries help in the conversion of the accounting
records of the companies to the accrual basis of accounting. For this reason, the accountants do
the accounting journal entries before the issue of the financial statements (Needles, Powers and
Crosson 2013).
It needs to be mentioned that certain reasons lead to the reordering of adjustment journal
entries. As pre the accrual accounting concept, the recognition of revenue is done in the period in
which it is earned; and the recognition of the expenses is done at the time of their incurrence.
Some business transactions have major effects on the revenue and expenses of the companies
more than one accounting period. For example, a company may receive fees for their services for
more than one accounting period or may pay their expense for more than one accenting year. In

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this process, the accountants cannot record advance revenue receive or advance payment of
expenses in the financial statements of the current accounting period as it is required to assign
them in the correct accounting years and in the correct financial statements (Year 2017).
In these situations, the adjustment journal entries play an integral part. The main purpose
of the adjustment journal entries is the correct assignment of the income and expenses in the
correct financial years and in the correct financial statements. With the assistance of adjustment
journal entries, the accountants assign a portion of the revenue to the particular accounting
period in which it is earned. By following the same process, the accountants assign a portion of
the expenses in the accounting period in which it is incurred (Stice and Stice 2013). Thus, it can
be seen that the presence of necessary adjustments journal entries ensure that the relevant
revenues and expenses are reported in the correct income statements of the correct accounting
period. This total adjustment helps in bringing correctness and transparency in the financial
statements of the companies and it also makes sure that all the financial statements are developed
based on correct accrual basis concept (Brown 2014). In this context, it needs to be mentioned
that the adjustment journal entries are done at the end of the accounting period.
Answer to Question 3
In the process of accounting for the business organizations, adjusted trial balance is an
important concept. An adjusted trial balance refers to the listing of all account names and their
balances in the trial balances after the completion of necessary adjustments for the current
accounting periods. In this context, it needs to be mentioned that adjusted trial balance is not a
financial statements as it is considered as an internal document. The main aim of the
development of adjusted trial balance is to make it sure that the debit balance of the trial balance
is matched with the credit balance of the trial balance (Chambers 2014).

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It needs to be mentioned that there are certain purposes that lead to the development of
adjusted trial balance. As per the earlier discussion, it can be seen that adjusted trial balance lists
the ending balances of the accounts after all necessary adjustments (Chatfield and
Vangermeersch 2014). Thus, one of the major purpose of the development of adjusted trial
balance is to correct the errors in the journal entries so that they can be recorded in the financial
statements of the companies as per the required accounting standards. After that, another major
purpose of the development of the adjusted trial balance is to get the summary of the balances of
all the accounts so that they can be helpful in the development of financial statements. For this
particular reason, all the adjusted entries are recorded in a separate column (Salim and Ferran
2014). Hence, from the above discussion, it can be seen that there are two major purposes for the
development of adjusted trial balance in the companies. First, the adjusted trial balance is
required for the verification of the debit balances with the credit balances of the trial balance.
Second, the presence of adjusted trial balance ensures the effective construction of various
financial statements of the companies like balance sheet, statement of cash flows and others.
However, in the recent years, disuse can be seen in case of adjusted trial balance due to the
inception of different accounting software. The application of different accounting software has
minimized the possibility of errors in the journal entries. Thus, from the above discussion, it can
be observed that adjusted trial balance has much importance in the accounting of the business
organizations (Kuter and Gurskaya 2014).
Answer to Question 4
In this context, it needs to be mentioned that the adjustment journal entries are different
from the closing journal entries on some major way and the accountants of the companies are

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required to take into consideration all these aspects. Thus, there should not be any mistake in the
recording of these entries (Scott 2015). They are discussed below:
The adjustments entries are done at the end of the accounting period so that the financial
statements of the companies remain updated as per the accrual basis of accounting. In this aspect,
electricity expense of the companies can be used as example. Companies use to use electricity
for each day basis, but they get the bill for monthly basis. Thus, it is required for the companies
to make the adjustments of the electivity expenses for the last 10 to 15 days in the financial
statements so that they can be properly recorded. Thus, it can be seen that it is the responsibility
of the business organizations to make the necessary adjustments related to the adjusted journal
entries at the end of the financial years (Weil, Schipper and Francis 2013).
In case of closing journal entries, it can be seen that they are dated as the last date of the
accounting period, but their entries into the accounts are done after the preparation of the
financial statements (Gassen 2014). In most of the cases, the income statement accounts are seen
in the closing entries. In the presence of the closing journal entries, the balances of the revenue
and expenses accounts become zero. It implies that there will be a new start of the revenue and
expenses account with nothing as balance in the accounts. It helps the business organizations in
the easy reporting of the new year revenue and expenses. Moreover, the net amount of the
revenue and expense balances will end in the retained earnings or the owner’s equity (Socea
2012).

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References
Brown, R. ed., 2014. A history of accounting and accountants. Routledge.
Chambers, R.L. ed., 2014. An accounting thesaurus: 500 years of accounting. Elsevier.
Chatfield, M. and Vangermeersch, R. eds., 2014. The history of accounting (RLE accounting):
an international encylopedia. Routledge.
Edmonds, T.P., McNair, F.M., Olds, P.R. and Milam, E.E., 2013. Fundamental financial
accounting concepts. New York, NY: McGraw-Hill Irwin.
Gassen, J., 2014. Causal inference in empirical archival financial accounting
research. Accounting, Organizations and Society, 39(7), pp.535-544.
Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D. and Tan, R., 2012. Financial
accounting. Pearson Higher Education AU.
Kuter, M.I. and Gurskaya, M.M., 2014. MAIN LINES OF STUDYING GENESIS AND
DEVELOPMENT OF ACCOUNTING. Practical Science Edition" Independent Auditor", 4(10).
Needles, B.E., Powers, M. and Crosson, S.V., 2013. Financial and managerial accounting.
Cengage Learning.
Needles, B.E., Powers, M. and Crosson, S.V., 2013. Principles of accounting. Cengage
Learning.
Salim, R. and Ferran, C., 2014. Accounting Server: Automatically Generating Accounting
Transactions from Business Modules. Journal of Applied Financial Research, 2.

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Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Socea, A.D., 2012. Managerial decision-making and financial accounting information. Procedia-
Social and Behavioral Sciences, 58, pp.47-55.
Stice, E.K. and Stice, J.D., 2013. Intermediate accounting. Cengage Learning.
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John
Wiley & Sons.
Year, B.C.S., 2017. Advanced accounting. Journal Entries in the books of Company, 12, pp.12-
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