Hello, and welcome to this lecture today My name is Justin lick from think numbers. And in this lecture we're going to be talking about the trial balance. So so far to date, we've been looking at the accounting equation, majority of the time, we've been looking at the double the double entry, debit and credit transactions. And we've actually made it managed to actually create these into transactions that you can actually put into a general journal and a T account or worksheet. And at this point, now, what we're what we're actually going to do is create a trial balance. And what that actually is, is it's a summary of all of the actual accounts with the closing balances to the end of the period.
And what we're going to do is it's going to put into a format like this, which will actually have the chart of account number which represent the individual account will take out Within the actual description of the the name of the actual account so that we know what it is, and we're going to have a debit and a credit, whatever the closing balance is, and, and obviously you remember that if an asset has a closing balance, it's got a debit, unless it's a contra asset in which it would have a closing balance as a credit, a liability would generally have a closing balance of a credit and an owner's equity for revenues, and share capital retained earnings generally will have a credit balance and expenses or if you've got a loss position in your attend earnings would have a debit balance. So what you need to do is we're going to actually translate each individual account into it into its own account as a closing balance.
We're going to continue down into every single account and every single account has to be included, you can't miss any. And then what you're going to find is at the bottom, you're going to have to balances all the debits and all the credits. And if the total balance of the debit column equals the credit column, then you've got a perfectly balanced dropouts. And this is the whole purpose of where we're trying to get to, to be to be able to prepare our financial statements. Now, another way to actually look at this is to actually not have a debit and credit column, but just to look at a positive or negative number. And one thing you'll notice is if we include all the debits as a positive number, and the credits as a negative number, and one thing you'll notice is that the total balance equals zero.
And so what we look for in practice is that we take in an entire trial balance, and if we aggregate everything in the in the column that will equal zero, and this proves that which includes every single account and every debit and credit. Now, so just wanting to summarize this into note is that what the trial balance does, it lists all the chart of accounts with a debit or credit total as a closing balance. It's actually a summary of all aggregated transactions. This includes all balance sheet and profit and loss related transactions or really any, any single account that's been affected throughout double entry transactions. And the other thing to note is that trial balance must equal zero, whether it's done as a single column up base, or whether you take all of the debits minus the credits, it must always equal zero. So that make sure that you include every single account in your trial balance.
So in the next lecture, what we're going to do is we're actually going to go back to the short film, case study. And we're going to actually put this into practice and see what it looks like and actually translate some of the items from T accounts and worksheets into the trial balance and put it into a bit more context. We'll see this