The Extended Trial Balance

Question 1

Describe the extended trial balance

Answer 1

• The extended trial balance will take the initial trial balance and make necessary adjustments to it in order to prepare the final financial statements.
• These adjustments will be the period end adjustments we have seen for items such an inventory as well as corrections errors.
• The extended trial balance will split the trial balance figures between the two financial statements (SFP and SPL).

Question 2

What are the steps to produce an extended trial balance (ETB)?

Answer 2

1. Complete the trial balance column with our general ledger balances. They should balance and if not a suspense account is needed.
2. In the adjustment column record any adjustments that are necessary.
3. Total the adjustment columns — they must balance to one another.
4. Take each row and put the final figure in either the profit/loss or SFP column.
5. Total the profit/loss columns — they shouldn’t balance. The difference is the profit and loss for the year. IF a profit has been made you would need an extra debit to make the columns balance. This is the profit for the year.
6. The other side should be entered into the SFP as profit for the year, i.e., debit the P/L account and credit profit on the SFP.
7. Total the SFP columns — they should now balance.

Question 3

What may en ETB in computerised accounting software look like?

Answer 3

Ensure all transactions, e.g., invoices have been entered up to the period date —> Reconcile accounts on the SFP, e.g., bank, VAT, etc. —> Clear any suspense accounts —> Post year end adjustments —> Run a final trial balance and lock the data to prevent any further changes being made.