FROM ‘T’ ACCOUNTS TO FINANCIAL STATEMENTS: CONSTRUCTING A TRIAL BALANCE
By now you should understand the rules that govern how and why ledger accounts are constructed. Hopefully you have now begun to wonder how all of this information will ultimately be recorded in a set of final accounts (like the ones we saw illustrated in Chapters 1 and 2). Remember that the details of all transactions for a business are recorded in the appropriate ‘T’ accounts as and when they occur. Before we use them to construct the final accounts, however, it is necessary to make sure that they are correct. We can test the arithmetical accuracy of the accounts by constructing a trial balance; this merely involves listing and then totalling, separately, the credit and debit balances (we told you there is no need to be a skilled mathematician to understand accounts). The trial balance is the second step in the production of the final accounts.