A proof of equality of debits and credits in a general ledger
Trial balance
In accounting, every transaction has two sides, debit and credit. A debit entry increases an asset or expense account and decreases a liability or equity account, while a credit entry does the opposite. Therefore, for every transaction, the total debits must always equal the total credits.
To prove the equality of debits and credits in a general ledger, follow these steps:
1. Start with the trial balance. A trial balance is a list of all accounts and their balances at a specific point in time. It lists all the debit balances in one column and all the credit balances in another column.
2. Calculate the total debits and the total credits from the trial balance. Add up all the debit balances in the debit column and all the credit balances in the credit column.
3. Compare the two totals. If the two totals are equal, then the debit and credit entries in the general ledger are balanced. This means that the accounting equation (Assets = Liabilities + Equity) is still in balance.
4. Investigate any discrepancies. If the two totals are not equal, there is an error somewhere in the general ledger. Carefully review each account and transaction and correct any errors found.
5. Re-calculate the trial balance and compare the two totals again. Repeat the process until the total debits equal the total credits.
By ensuring the debits and credits in a general ledger are balanced, you can be confident that the financial statements, such as the income statement and balance sheet, accurately reflect the financial position of the company.
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