5 - Preparing basic financial statements

Question 1

How do we close off T accounts?

Answer 1

See which side adds up to the bigger number. You put this in the 2 lines at the bottom and make sure its the same for both sides. The difference will be the balancing figure.
If this is a statement of financial statement account then we put that figure as carry forward and then on the opposite side for the next year it would be the brought forward figure.
However if it is PNL it is only for that 1 year period. We want to clear everything out to nil. We make a profit or loss ledger. difference between bottom figure on the PNL ledger T account is the profit for the period.

Question 2

What should be in the debit and credit sections of trial balances?

Answer 2

Debit - expenses assets drawings
Credit - liabilities income capital

Trial balance should balance at the bottom total figure.

Question 3

Where do you make trial balance adjustments?

Answer 3

In the correcting journals