okay so now that we have entered our transactions in our journal and then taken that information and posted it to the individual te accounts we can now prepare What's called the unadjusted tri balance and essentially all we're doing is taking the balance from each of our tea accounts and putting it in this nice neat list that we call a trial balance and really it's just the balances of each of our accounts at a particular point in time so here is an example so don't fill it out just yet we're going to go through and fill it out together but I what a trial balance is is like I said it just lists each account with their balance and then what you can see at the bottom is notice that our total debits should equal our total credits so as long as each each of our journal entries balanced meaning the left side equal the right side this should equal so there's a couple of things or a few things that we use this for first of all we want to make sure that our debits equal our credits and we do and then you might recognize any mistakes now we run this one before our adjusting journal entries which is in chapter three so for right now we're just making sure our debits and our credits equal now the other thing about it is notice that the accounts are listed in order of your a so all our assets are listed first actually in order of liquidity meaning the more liquid it is or the the faster or the easier that we convert it to cash or use it up that's listed first so cash is always listed first and then your more long-term assets are listed below that like land Building furniture and so forth and followed by your liabilities remember it's order Al assets and liabilities and then your Equity accounts um so you might say a question I commonly get is how am I going to know what order to put this in in my lab for your home homor well what you find is that myap forces you to put it in a certain order so of course cash goes first but after that you'll find that my laab will only give you say accounts receivable and maybe some liability accounts so as long as you know accounts receivable is an asset you'll put it next so it kind of forces you into putting it in the correct order okay so now what I want to do is I want us to uh prepare this together so let me pull up our trial balance so you can see our T counts on the left and then our what we're about to prepare is the unadjusted trial balance here on the right so I'm just going to call this unadjusted trial balance so all I'm doing is transferring these balances um from the side that they're on in the te account to the side on our trial balance so here cash is our first one so let's start with cash most liquid assets so since we have 12,200 over here on the left side we're going to put it on the left oops or what we call the debit side okay remember debit just means left credit means right and so we'll go through now I will try to list these in order of liquidity I know I listed them um an order that they occurred and not necessarily an order of liquidity over here so accounts receivable our balance is $1,000 oh you don't really need the decimal um I'll go ahead and fix that okay but it did take away some of my formatting here so let me fix that okay so accounts receivable then I'm looking for another um current asset so uh you know I'll just make my best guess for now so we'll see we have office supplies and prepaid rent so I'm going to say office supplies and so that is 500 and then we have prepaid rent so prepaid rent balance is 3,000 okay so that is takes care of our current assets and now our long-term assets so I'm going to say furniture because we would use that up before our building and then we have um building and our building is 60,000 and then last land land has an indefinite life goes on forever so I'm going to put that last okay and okay so we should be done with our assets so what I'm going to do is I'm going to highlight these notice my total is 11 14,700 so when I highlight these you can see the total in the very bottom right of what you highlight in Excel so it's kind of nice I know I got them all because notice my our total assets is7 114 14,700 now the other thing I want to point out so all our assets I'll go ahead and highlight these make them um a nice pretty color there notice they all assets increase with the debit remember it's part of my dead a stands for assets they increase with debits so notice the balance should be on the debit side okay so now we'll we'll start with our liability accounts so for liabilities we don't have very many so I'm going to start with accounts payable okay liabilities notice sorry that's 300 not 500 so notice they increase on the credit side or the balance is on the credit side so I put it on the credit or the right side so um unearned Revenue hey okay that balance is $600 and then we have notes payable now notice mostes of our liability accounts they have the word payable in them with the exception of unearned Revenue so these are all three of our liability accounts 6,900 if I total that up so let's make these another color so let's make it um green for money there okay notice that all liabilities should be on the right side or the credit side and they are and now we'll start with our Equity account so I'll put common stock okay and that is 48,000 we um don't have any uh retained earnings balance so we don't need to worry about that and let's see do we have any dividends we sure do now dividends they have a debit balance just like um our expenses they increase with the debit so it's 5,000 oops not 50 okay and then we start with our revenues and we have service Revenue because we're only selling services right now and so that's part of our clear should have a credit balance and then all our various expenses so um rent expense they increase with the debit as well should have a debit balance so we have rent we have salaries expense and that balance is 3600 then we have utilities and that should be all of them so utilities expense is 100 so now um let's highlight these just to make them stand out a little bit more so how about a yellow all right so let's add up all our debit so I'm going to use I can close this other now so let's use our aosome feature here um I use that frequently and I get 125,00 so if I drag this to the right my credits should also equal the same amount and they sure do now you could have a problem where let's say um we don't know one of the accounts so I'm just going to delete say unearned Revenue so what happens is if you were to have a list of accounts with a balance but they they put like a question mark for une earned Revenue well we know that unearned Revenue should have a credit balance because it's a liability account so what you would do to solve for this one so we're just pretending they didn't give us that number what we would do is go ahead and total our debits and total our credits but take the difference right so we take the difference and it's $600 so if we plug that in you can see now our debits equal our credits because usually you have at least one question where you have to solve for the missing um amount okay so let's go back to our power PowerPoint this is your trial balance and again um we would use this make sure our debits equal our credits at this time but then we could use this to prepare uh our financial statements so let me fix this so now we could prepare our financials using that information so I think it's really cool um these financials re still need some adjustments and that's what we'll go through in the next chapter but before we move on this does a good job of showing you that we have to prepare them in this order I study really early before cramming fast so your income statement you pull your net income to the statement of retained earnings then you pull your ending retained earnings there um for your equity on the balance sheet okay so what happens on your trial balance if your debits and credits don't equal well I would first um you know take the difference of the debits and credits and see if you recognize that number if you don't sometimes I then divide by two I actually use this quite a bit um in Industry now another thing you could do is divide by nine if you transposed or Swit flipped some numbers um I really haven't didn't tend to do a lot of that I'm finding that I'm doing a little bit more now but um these are just some tips that you could use to help you when you're working in accounting I'm not necessarily going to test you on these things okay so the accounting cycle so far what we've done is um we've entered transactions in our our journal and then we post that to our Ledger the te account here now what this is showing you that we haven't necessarily talked about is that you usually have a beginning balance which is the 2200 here so then when we had a journal entry and we booked to accounts receivable we started with 2200 we entered 400 and then the total of 2600 would be what is entered on the trial balance so we have journal entries WE Post those and then we prepare What's called the unadjusted trial balance that's where we're at right now okay so our ratio for this chapter is the debt ratio we're going to see how much of our assets were financed by debt versus equity and if you have too much debt it's obviously a problem so we're looking to see if the company is considered healthy because if they have too much debt then they won't be able to pay that back so again we have PepsiCo here and so um 82% of their assets are financed there with liabilities so that means um 27.4% are with Equity so you might say is that good or bad of course once again you want to compare that to the industry average because some businesses are going to have um higher debt uh a debt ratio higher debt ratio than others so again that you want to compare it to the industry average okay so that concludes this chapter of course if you have any questions please don't hesitate to reach out to me