Welcome back to Module 2! Before we jump into the fascinating world of financial statements, let’s unravel the secrets of the Trial Balance.

Lesson 1: Unveiling Trial Balance

1.1 Understanding Trial Balance:

Definition: A list of all general ledger account balances at a specific time.

Purpose: Ensures the accounting equation (Assets = Liabilities + Equity) is in balance.

1.2 Preparation of Trial Balance:

Step 1: List all accounts with their balances (Debit or Credit).

Step 2: Total the Debit and Credit columns.

Step 3: Verify if the totals are equal. If they are, your books are balanced!

Lesson 2: Debits and Credits Decoded

2.1 Debit vs. Credit:

Debit: Increases assets and expenses, decreases liabilities and income.

Credit: Increases liabilities and income, decreases assets and expenses.

2.2 Normal Balances:

Assets and Expenses: Debit (increase with a debit, decrease with a credit).

Liabilities, Equity, and Income: Credit (increase with a credit, decrease with a debit).

Lesson 3: Errors in Trial Balance

3.1 Common Mistakes:

Transposition Errors: Switching digits when recording.

Incorrect Balancing: Errors in addition or subtraction.

Omission of Entry: Forgetting to record a transaction.

3.2 Locating Discrepancies:

Recheck Addition and Subtraction: Ensure your math is accurate.

Verify Account Balances: Ensure each account balance is correctly recorded.

Conclusion:

Congratulations! You’ve mastered the Trial Balance. Now, let’s delve into the core of financial statements in Module 3.