Immediately check the balances of all of your accounts with a trial balance; a listing of all business accounts and their balances, such as cash accounts, accounts receivable, pre-paid accounts, property, equipment, accounts payable, bank loans, and shareholder loans. The Trial Balance is key in reconciling your financial statements.
In this video…
Hi, Greg here from On Track Business Management. In this video, we’re gonna be talking about the trial balance. As the owner of the company, you may not regularly read the trial balance like you would the income statement in the balance sheet, but I’d still like you to be comfortable with the trial balance. When you have your bookkeeper hat on, use the trial balance as a key reconciling tool. The trial balance has all the account balances in one report. The trial balance can be run to show account balances at the beginning of the year. This is helpful when you want to compare balances from the beginning of the year, to the current balance. Permanent accounts live on the balance sheet. Balances of the permanent accounts like a checking account are carried over to the next year when closing the fiscal year. Temporary accounts live on the income statement. Temporary accounts like the income and expenses are zeroed out at the fiscal close and start at zero at the beginning of the fiscal year.
In the next video, we’ll learn how to read the balance sheet.
Next Video: Balance Sheet