A working trial balance is a trial balance that is in the process of being adjusted. In concept, it is an unadjusted trial balance, to which you pencil in any adjusting entries needed to close a reporting period (such as for the monthly, quarterly, or annual financial statements). These additional entries are then entered in the general ledger, resulting in a completed trial balance.
The working trial balance is useful for testing a complete set of adjusting entries to determine their impact on the financial statements, before actually making the entries in the general ledger.
The steps required to use a working trial balance (assuming the existence of an accounting software package) are:
- Print the current version of the ending trial balance, or (better yet) convert the report to an electronic spreadsheet.
- Enter all adjusting entries needed to close the month.
- Note the descriptions and calculations for each adjusting entry at the bottom of the report.
- Carry forward the adjusted account balances to the right side of the report and manually translate them into the income statement and balance sheet.
- Revise the adjusting entries as needed, based on the preliminary financial statement results.
- Create journal entries for each entry made in the working trial balance, and enter them in the general ledger, along with explanations.
- Print the trial balance again, and verify that all entries were made to the correct accounts and in the correct amounts.
The columns used in a working trial balance (in order from left to right) are:
- Account number
- Account name
- Ending debit total
- Ending credit total
- For manual entries: Blank space for debit entries
- For manual entries: Blank space for credit entries
- For financial statements: Blank space to enter income statement and balance sheet totals
The working trial balance is part of the documentation required to prepare the financial statements; it is not part of the financial statement reporting package.
It is not possible to construct a balanced working trial balance in a single entry system; the report is designed for use only with a double entry bookkeeping system.